US-based GTT Communications is continuing its global expansion through acquisitions with the agreed takeover of European operator Interoute for EUR 1.9 billion.
The acquisition gives GTT over 400 new points of presence, spanning 24 metro areas and interconnecting 126 cities across 29 countries. The company also gains 15 data centres, 17 virtual data centres and 51 colocation facilities, as well as expertise in SD-WAN and cloud networking services. In addition, Interoute brings over 1,000 enterprise and carrier clients, primarily headquartered in Europe.
Interoute shareholders the Sandoz Family Foundation, Aleph Capital and Crestview Partners are backing the takeover. Started as a wholesale operator in 1995, UK-based Interoute has expanded strongly in the enterprise market in recent years, notably acquiring Easynet in 2015.
GTT has agreed debt financing for the transaction from a group of financial institutions and committed equity financing of USD 250 million from its largest institutional investor, the Spruce House Partnership, and Acacia Partners. GTT expects the transaction to close in three to six months, subject to customary regulatory approvals.
Interoute generated revenues of EUR 718 million and adjusted EBITDA of EUR 165 million for the 12 months to September 2017. At closing, after funding the acquisition with a combination of debt and equity, GTT expects its leverage to reach 5.0-5.5x adjusted EBITDA, based on pro forma results plus expected cost synergies. After closing, over time, GTT said it aims to reduce the group ratio to 3-4x.
