Starboard Value Takes a Stake in Zayo

The Boulder, Colorado-based Zayo operates a fiber networks in the United States and Europe, helping data centers connect.

Jeffrey Chad Smith, CEO of New York-based Starboard Value LP fund

Activist investor Starboard Value has acquired a 4% stake in communications infrastructure provider Zayo and is pushing the company to consider a sale, according to a letter from the firm to investors.


The letter comes as Zayo canceled its March 14 analyst day and said that it is evaluating its options. In the past year, Zayo has lost a quarter of its market value.


In the letter, Starboard said that a sale of the company may be the best option for investors, adding that the process must be conducted in a “purely objective way.”


Any potential conflict of interest, including board and management roles, should not be allowed to affect the deliberations, Starboard wrote.


“While the company does not comment on discussions with specific shareholders, it is important to note that members of the company’s board and management team are in active dialogue with many of our top investors in an effort to understand their views,” Zayo said as a response.


The Boulder, Colorado-based Zayo operates a fiber networks in the United States and Europe, helping data centers connect. The company also serves wireless and landline phone companies.


In its letter, the activist blamed the decrease in the company’s revenue growth to a poorly integrated acquisitions, senior leadership turnover and lack of spending discipline.

Starboard said that if Zayo decides to remain independent, it would need to streamline its business, adopt a more disciplined approach to capital allocation, and improve its corporate oversight.


Another investor, Sachem Head Capital Management has also pushed the company to explore a sale, Reuters reported last month.


However, Zayo rejected takeover offers in the past months, including from a consortium comprising Blackstone, Stonepeak Infrastructure Partners, KKR, I Squared Capital, Charlesbank Capital Partners and GTCR, according to Reuters.


In response to the activist’s letter, Zayo said that welcomes input and says it's in "active dialogue with many of our top investors" to understand their views.


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