GTT Communications to buy Europe's Interoute for $2.3 billion

GTT Communications, Inc. (NYSE: GTT) has reached an agreement to buy European fiber-optic network services provider Interoute for approximately €1.9 billion ($2.3 billion) in cash via debt financing. Interoute operates a 72,000-km fiber network that includes more than 400 points of presence in 24 metro areas, connecting 126 cities across 29 countries. GTT says it would gain more than 1,000 strategic enterprise and carrier clients, primarily headquartered in Europe.

The U.S.-based network services provider also will gain 15 data centers, 17 virtual data centers and 51 colocation facilities. The company also believes the deal will strengthen its software-defined wide-area networking (SD-WAN) capabilities as well as add infrastructure, edge, and hosted services to GTT's suite of cloud networking offerings.

"The acquisition of Interoute represents a major milestone in delivering on our purpose of connecting people, across organizations and around the world," said Rick Calder, GTT president and CEO. "This combination creates a disruptive market leader with substantial scale, unique network assets, and award-winning product capabilities to fulfill our clients' growing demand for distributed cloud networking in Europe, the U.S., and across the globe. Following our successful, proven acquisition model, we expect to complete this integration within three to four quarters post-close and achieve a post-synergy multiple of seven to eight times adjusted EBITDA or better on a pro forma basis."

Interoute reported revenues of €718 million ($884 million) and adjusted EBITDA of €165 million ($213 million) for the 12 months ending September 30, 2017. GTT expects the purchase to close in three to six months, subject to customary regulatory approvals.

GTT says it has received committed debt financing for the deal from a group of financial institutions and committed equity financing of $250 million from GTT's largest institutional investor, The Spruce House Partnership, and Acacia Partners. At closing, after funding the acquisition with a combination of debt and equity, the expected ratio of total net debt to adjusted EBITDA will be approximately 5.0-5.5:1, using pro forma combined adjusted EBITDA plus expected cost synergies. After closing, GTT expects to reduce the ratio of total net debt to adjusted EBITDA over time to its long-term target range of 3.0-4.0:1.

The upcoming purchase is the latest in GTT's recent expansion spree. The company also has announced deals for Custom Connect, Perseus, Global Capacity, and Hibernia Networks since November 2016.

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