By: Gigaom
The data center and mobile web drive Lightower Fiber’s and Sidera’s $2B merger
Without the underlying pipes connecting data centers, cell phone towers and telco points of presence, there would be no internet. A $2 billion deal to merge two fiber providers shows how the new infrastructure demands of the consumer web and cloud computing are driving deals.

Lightower Fiber Networks will merge with Sidera Networks, and the combined entity will be acquired by private equity firm Berkshire Partners in a transaction valued at more than $2 billion. The combination of the two firms, which provide metro-area fiber to data center and carrier customers, is another indication of how our love of connectivity and the web is driving deals outside of the consumer web.

The combination of ubiquitous broadband and cloud computing are behind the birth of massive data centers, ever smarter (and larger) mobile devices and fatter networks. And when it comes to building fatter networks a new generation of companies has arisen that are using fiber to deliver Ethernet capacity to Internet Exchange points in a way that’s more flexible and cheaper than older copper-based or point-to-point fiber networks. We are moving into the terabit age, and in the last few years, several new companies building out fiber networks have started and received private equity investments, including Sidera, Lightower, Allied Fiber, Zayo and others.

Craig Plunkett, managing director of CEDX Corporation, wrote a post for GigaOM last year describing the change in connectivity that is behind this deal:

Ethernet exchanges open options for subscribers and publishers that didn’t exist in the time of point-to-point provisioning. Combine the growth of MetroE footprint, the increases in carrier Ethernet capacity to 40 and 100 Gigabit and new long- and short-haul dark fiber providers coming online with connections to Ethernet exchanges, and the world sees the rise of a new international communications platform being built on an Ethernet backbone that’s cheaper and more flexible than legacy copper. This is a repeat of the revolution that took place over a hundred years ago with the rise of the Bell system. In this case, it’s being built on a packet switched fiber infrastructure, and with central offices that are carrier-neutral from their inception. This new platform will give rise to revolutionary capabilities and efficiencies in the way we communicate, produce and consume content, store data and use compute cycles.

M/C Partners and Pamlico Capital acquired Lightower from National Grid plc in August 2007 and also has an investment in Zayo. M/C will exit Lightower with this deal, while Pamlico Capital, a Lightower investor, and ABRY Partners, a significant Sidera investor, will remain as investors in the new company. The combined company will be led by current Lightower CEO, Rob Shanahan. The merger is pending regulatory approval and is expected to close in the second quarter of 2013.

Following the merger, the combined company will have a 20,000-mile fiber-based network throughout the Northeast, Mid-Atlantic and Midwest, with connections to critical landing sites and exchanges internationally. The combined network will provide access to more than 6,600 on-net locations, including commercial buildings, data centers, financial exchanges, content hubs and other critical interconnection facilities.



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