February 11, 2019 / 10:49 PM / in 8 days

Exclusive: Activist Sachem Head pushes Zayo to explore sale - sources

(Reuters) - Activist hedge fund Sachem Head Capital Management has written a letter to U.S. communications infrastructure provider Zayo Group Holdings Inc urging it to explore a sale, according to people familiar with the matter.

The letter comes after Zayo rejected acquisition offers from a private equity consortium that includes Blackstone Group LP, Stonepeak Infrastructure Partners LP, KKR & Co, I Squared Capital, Charlesbank Capital Partners and GTCR, the sources added, asking not to be named because the matter is private.

Sachem Head and Blackstone declined to comment. Zayo as well as the other funds in the consortium could not be reached for comment.

The latest offer that Zayo rejected valued its stock at about $30 per share, the sources added. Shares ended trading on Monday at $25.51 a share, giving it a market capitalization of roughly $6 billion.

Zayo also had about $6 billion in debt. If the private equity firms succeed in acquiring Zayo, it would represent one of the largest leveraged buyouts of the year.

Sachem Head has not threatened to launch a proxy fight but that option remains on the table, the people said. The hedge fund, which is run by Scott Ferguson, a former partner at William Ackman’s Pershing Square Capital Management, owns a 2 percent stake in the company, making it the 12th largest shareholder, according to Refinitiv data.

Sachem Head had success at pushing for changes at companies such as Autodesk Inc and Whitbread Plc in the past.

Zayo had announced last November it would break itself up into two companies, but said last week it no longer believed it was in the company’s best interest to pursue a public spinoff as part of its strategic review.

Zayo, based in Boulder, Colorado, operates a fiber network in the United States and Europe that helps connects data centers and also serves wireless and landline phone companies.

It generated revenue of $639.1 million last quarter, which missed Refinitiv estimates of $642 million. Its quarterly net income of 12 cents per share missed analyst estimates by a cent.

Reporting by Carl O'Donnell and Joshua Franklin in New York; Additional reporting by Liana B. Baker in New York and Svea Herbst in Boston; Editing by Dan Grebler and Peter Cooney

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