Zayo Group Holdings, Inc. (ZAYO) through its subsidiaries, provides bandwidth infrastructure solutions for the communications industry in the U.S., Canada and Europe. Customers include wireless and wireline carriers, media and content companies and finance, healthcare and other large enterprises.
Earlier this year I wrote a post about Zayo jumping almost 10% after Bloomberg reported that talks were heating up between Google and CenturyLink to buy Zayo and when news hit the wire, the Smart Money has been buying up all the call options they can in Feb and Mar, thinking the buyout will occur by mid-March.
Since I have been tracking unusual option activity, I have seen other potential buyout rumors with the Smart Money getting the timing incorrect. They got the timing wrong on this one as well because the stock price didn’t break the $30 level by mid-March.
However, the Smart Money was definitely right about the direction. This week, Zayo Group Holdings agreed to terms with global investment companies EQT and Digital Colony Partners to be acquired for $14.3 billion in cash or $35 / share.
Zayo CEO Dan Caruso explained that the two institutional investors share its vision for the future of fiber networks and appreciate the company’s assets.
The take away for me is if I see buyout rumors and the Smart Money getting involved, the best approach is to buy a bit more than to allow for the negotiations process to pan out. In this case if the May or June calls were purchased, your options would be profitable. In addition, since the Smart Money bid up the Feb and March call options, those options would be selling at a higher premium due to supply and demand. This is probably the third time I have seen this and you know what they say….three points creates a trend (line).
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.