GTT to buy Hibernia Networks for $590 million

Global cloud networking services supplier GTT Communications, Inc. (NYSE:GTT) says it has agreed to acquire fiber-optic network services provider Hibernia Networks. GTT will pay $590 million to add submarine cable and terrestrial network infrastructure to its portfolio via a combination of $515 million in cash and approximately 3.3 million shares of GTT common stock worth $75 million.

The companies expect the deal to close by the end of first quarter 2017.

Hibernia networks operates multiple transatlantic submarine networks, including Hibernia Express (see "Hibernia Express transatlantic submarine cable network ready for service"), and eight cable landing stations. It also owns complementary terrestrial networks to provide optical transport, Ethernet, and carrier-grade IP transit services, including dedicated cloud connectivity, low-latency services, DTM, and HiberniaCDN. The latter is a content distribution network (CDN) offering that would add a new service market for GTT.

GTT President and CEO Rick Calder said in an interview yesterday that his company wasn't actively shopping for fiber-optic infrastructure; the company had been satisfied with its current practice of leasing lit services to support its worldwide operations and was a Hibernia customer. However, Calder said his company has traditionally been opportunistic when it comes to acquisitions (GTT has purchased several network services suppliers). When Hibernia Networks financial advisors Bank Street Group LLC approached him about the possibility of the deal, Calder listened – and liked what he heard.

Calder said Hibernia's operations complement GTT's, both in terms of expanding his service mix as well as operating networks where GTT has customers or would like to have them. He expects at least some of Hibernia's management team to join GTT, although he declined to cite specific examples. Bjarni Thorvardarson is Hibernia Networks' CEO, and Calder said he both likes and respects him.

Calder said the pending acquisition does not signal a desire to start buying infrastructure globally. "It's not critical," he said of owning more of the infrastructure GTT currently uses. "Our goal is not to buy fiber assets everywhere." However, he said that the acquisition would bring "tradable assets" that GTT could leverage. He also did not rule out other opportunistic purchases.

In a press release announcing the proposed transaction, Calder states that he expects to complete integration of the new assets within two to three quarters after the deal closes and to achieve a post-synergy multiple of seven times adjusted EBITDA or better on a pro forma basis. In yesterday's interview, Calder said the expected synergies will about pay for the transaction.

The combination of two growing companies should result in even further growth, Calder said. He contrasted the transaction, which should benefit the company's focus on cloud services provision, with what he sees as defensive moves such as the proposed AT&T purchase of Time Warner as well as Verizon's purchase of AOL and proposed purchase of Yahoo!, in which the U.S. Tier 1s "want to become media companies," he said.

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