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Why Zayo Group Holdings, Inc. Stock Popped Today

By Steve Symington – Nov 19, 2018 at 4:30PM

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The bandwidth infrastructure specialist has attracted takeover interest.

What happened

Shares of Zayo Group Holdings (ZAYO) were up 10.3% as of 3:30 p.m. EST Monday, following a Bloomberg report that the bandwidth infrastructure services company is a takeover target.

Citing "people with knowledge of the matter," Bloomberg writes that a group of investors are interested in potentially taking Zayo private, including funds managed by Blackstone Group (BX), Stonepeak Partners, KKR & Co. (KKR -1.16%), I Squared Capital, GTCR, and Charlesbank Capital Partners.

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So what

The timing of this development is no coincidence. Less than two weeks ago, Zayo Group shares plunged nearly 30% after the company not only released disappointing third-quarter results, but also announced a plan to split its infrastructure and enterprise services businesses into two publicly traded companies via a taxable spinoff late next year.

Zayo CEO Daniel Caruso insisted the split is the "logical next step" in Zayo's evolution, asserting that it will reduce complexity and allow each business segment to better focus on its respective specialty.

Now what

Bloomberg cautioned today that there are no guarantees a takeover deal will be reached, noting that Zayo remains focused on the business split. But with shares still down nearly 20% over the past month, and given the prospect of a juicy takeover premium in the meantime, it's no surprise to see Zayo stock rebounding today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends KKR and Zayo Group. The Motley Fool has a disclosure policy.

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