Lumos Networks, a fiber-based service provider in the Mid-Atlantic region serving carrier, enterprise and data center customers, has closed a transaction to acquire Charlotte, North Carolina based DC74 Data Centers. Lumos Networks will acquire DC74’s three data centers for a total cash consideration of $23.5 -$28.5 million, depending on future growth earn-out projections, implying a multiple of approximately 8-10x Adjusted EBITDA in 2016.
“I am excited to announce the acquisition of DC74’s three data centers and welcome the entire DC74 team into Lumos,” said Timothy G. Biltz, President and CEO of Lumos Networks. “Like Lumos, DC74 targets ‘large locals’ as customers, namely Enterprises with strong local/regional presence and focuses on securing long-term contracts. This acquisition increases the number of Lumos operated colocation facilities to 10 and we look forward to continuing to add expertise and capabilities in this strategic data segment. Evidence strongly suggests that colocation services drive customer stickiness, wallet share and significant increases in bandwidth usage.”
Founded in 2008, DC74 provides colocation, disaster recovery, managed services and managed hosting at its 3 fiber-fed facilities in Charlotte. The company has been named to the Charlotte Business Journal list of the 50 fastest growing private companies in Charlotte for four consecutive years. DC74 has 42,000 square feet of secured data center space.
“Over 80% of DC74’s revenue is derived from colocation, bandwidth and cross-connects with the remainder from managed services and managed hosting at its 3 data centers,” added Mr. Biltz. “The combination of DC74 and recently acquired Clarity Communications increases our annualized data revenue in the North Carolina market to more than $10 million, most of which is tied to Enterprise. This represents a strong advancement towards reaching the scale necessary for Lumos to become a pure-play communications infrastructure bandwidth company. We believe that the combination of DC74/Clarity is accretive to our overall Adjusted EBITDA multiple and we viewed them in tandem during the parallel transaction processes.”
With a fiber network of 9,204 fiber route miles and 475,507 total fiber strand miles, Lumos Networks connects 1,297 unique Fiber to the Cell sites, 1,642 total FTTC connections, 36 data centers, including 7 company owned colocation facilities, 1,984 on-net buildings and approximately 3,300 total on-net locations. In 2015, Lumos Networks generated over $114 million in Data revenue over their fiber network.
“I have been impressed in Lumos Networks’ ability to execute its transformation into a communications infrastructure player and we are excited to be on the Lumos team,” said Tareq Amin, CEO and founder of DC74. “DC74 has 12 carriers inter-connecting at our facilities, including Level 3, Cogent, Zayo and AT&T, the most of any data center in Charlotte. Charlotte is a high growth market and I look forward to working with the Lumos/Clarity teams to accelerate our growth in the coming years and contribute towards the expansion of our North Carolina footprint and capabilities.”