August 23, 2007
Onvoy Rings Up a Buyer: Telecom Sold to Colorado Startup
By Leslie Brooks Suzukamo, Pioneer Press, St. Paul, Minn.
Aug. 23--After almost 20 years in business, Onvoy Inc., a St. Louis Park-based telecom company catering to small- and mid-sized businesses, is being bought by a Colorado broadband startup.
Zayo said Wednesday it will buy all shares of Onvoy's privately issued stock. Terms of the agreement were not released. The sale is expected to close in the fourth quarter this year.
Onvoy CEO Janice Aune said her company had been looking for new investors to help it grow this year and had solicited inquires from potential buyers. "We see this as an extremely positive move," she said. Zayo was "heavily committed" to continuing to support the rural telephone companies that helped form Onvoy almost 20 years ago, Aune said.
Aune will help with the company's transition to Zayo's ownership, but won't be involved with the company after that.
Onvoy was established in 1988 by a group of independent phone companies as Minnesota Equal Access Network Services. It combined with Minnesota Regional Network or MRNet in 1997 and was renamed Onvoy in 1999.
Zayo Bandwidth CEO Dan Caruso said he could not guarantee there would be no layoffs at Onvoy, which employs 240. He noted Zayo has only about a dozen employees itself and needs workers to maintain its network.
In 2003, Onvoy was caught in the middle of a messy fight between former long distance giants MCI Worldcom and ATT. ATT accused Onvoy of illegally conspiring with MCI to pass along phone-call routing charges to ATT.
The three parties settled a racketeering and fraud lawsuit brought by ATT in February 2004 without disclosing the terms.
Zayo, formed last November, says in the past two months it has reached agreements to acquire PPL Telcom, of Allentown, Pa., Memphis Networx, of Memphis, Tenn., and Indiana Fiber Works of Indianapolis. Five venture capital firms -- Battery Ventures, Columbia Capital, Centennial Ventures, MC Venture Partners and Oak Investment Partners -- have earmarked $225 million to Zayo Bandwidth.
Like Onvoy, the three companies operate fiber-optic networks that can provide high-speed Internet access and voice and video services. Memphis Networx already is part of Zayo, while the deals for PPL Telcom and Indiana Fiber Works are awaiting regulatory approval.
"Our hope is to find other companies that we can put into the mix as well," Caruso said.
Zayo is looking for companies with 15 percent or better revenue growth, and Onvoy fit that bill, he said. He and Aune declined to reveal Onvoy's revenue but the combined revenue of the four acquired companies would be $130 million, Caruso said.
Zayo Bandwidth may be new, but its senior management has extensive experience in the telecommunications industry, Caruso said. Caruso was a founding executive member and officer of Level 3 Communications, an Internet-based telecommunications provider based in Broomfield, Colo., and the other senior managers also worked there at some point.
Most recently, Caruso was president and CEO of ICG Communications, a Colorado telecommunications company that Level 3 acquired last year for $163 million. ICG was a high-flier in the late 1990s that filed for bankruptcy reorganization after the telecom crash. Caruso did a successful turnaround on it, Aune said.
Leslie Brooks Suzukamo covers telecommunications, technology and energy and can be reached at [email protected] or 651-228-5475.
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Copyright (c) 2007, Pioneer Press, St. Paul, Minn.
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