Zayo Group Holdings, Inc. today announced that the company is postponing next Thursday’s scheduled analyst day because the board is “evaluating strategic alternatives that may enhance shareholder value.”
Typically, such “strategic alternatives” can involve the sale of assets, sale of an entire company or division, going private or even the possibility of being acquired by another company.
There are other reasons to postpone analyst days, such as errors found in a review of the company’s financials, but the brief commentary the company offered in making the announcement didn’t indicate any such issue – and any publicly traded company would need to disclose such an issue if it was the reason for the delay.
Telecom industry analyst Jeff Kagan said: “Analyst days look back and look forward. When strategy is going to change going forward, it makes no sense to hold an analyst day.”
However, Kagan added that he had no specific insight as to the reason for the Zayo delay.
“Zayo’s purpose is to provide mission-critical bandwidth to the world’s most impactful companies. We accomplish this by executing a focused strategy centered on communications infrastructure. With our deep and expansive fiber networks in North America and Europe, we play a unique and compelling role at the core of our customers’ networks,” said Dan Caruso, Zayo Chairman and CEO, in a prepared statement. “Whether public or private, this will remain Zayo’s focus and we will continue to expand the depth and breadth of our fiber infrastructure.”
In a prepared statement the company said: “There can be no assurance that any strategic alternative will result from this evaluation. Zayo has not set a timetable for the evaluation of its options, although it anticipates a minimum of several weeks to months, and does not intend to comment further unless it determines that further disclosure is appropriate or required by law.”
Update (March 7, 2019)
A day after Zayo Group Holdings Inc. announced the delay of its analyst day, Reuters is reporting that a large, activist shareholder is pushing for the sale of the company.
According to Reuters, activist hedge fund Starboard Value LP has acquired a 4% stake in the company – enough to have significant influence in the direction of the telecom infrastructure provider, and has requested that the board consider a sale. Reuters cites a letter sent by Starboard to Zayo today.
The company’s stock price jumped 13 percent Wednesday after the company said it was cancelling the analyst day as it sought ways to enhance shareholder value. In today’s pre-market, the company’s share price was indicated up another 2 percent.
It should be noted, however, that the company had lost 25% of its market value in the last year, which the Reuters report blamed on amid anemic revenue growth and heavy capital expenditure. Additionally, Zayo has previously rejected earlier offers to purchase the company.
Citing the letter, which Reuters said it had reviewed, Starboard says it thinks the best way to boost shareholder value is to sell the company. “Starboard in its letter blamed a string of poorly integrated acquisitions, senior leadership turnover and lack of spending discipline for the company’s revenue growth decreasing from 7.8% in September 2015 to 3.6% at the end of 2018. Were Zayo to decide to remain independent, it would need to streamline its operations, adopt a more disciplined approach to capital allocation, and improve oversight of the company, the New York-based fund wrote.”
