GTT To Acquire Off-Net Customers from Global Capacity

By Khali Henderson

In its second acquisition in less than 60 days, Global Telecom & Technology Inc. (GTT) (GTLT), a global network integrator based in McLean, Va., announced Tuesday it has signed an agreement to acquire certain customers and assets from Chicago-based Global Capacity, whose parent company is Capital Growth Systems Inc. (CGSY).

Under the terms of the agreement with Global Capacity, GTT will pay up to $8 million in cash for contracts with more than 100 data transport customers generating up to $25 million in annualized revenue. The transaction is expected to close in the first quarter of 2010, subject to customer and other supplier consents and approval by the Federal Communications Commission.

Last month, the company closed another acquisition – this one with WBS Connect. The WBS Connect acquisition expands GTT’s portfolio of IP transit and Ethernet services, and adds more than 60 points of presence in major metro markets throughout North America, Asia and Europe.

The Global Capacity asset acquisition, essentially a customer base acquisition, also supports GTT’s strategy to scale its business, according to president and CEO Rick Calder.

GTT said many of Global Capacity’s customers also are existing GTT customers, and it expects to rapidly integrate them into its proprietary operational platform through its Circuit Management Database (CMD), resulting in virtually no service interruptions.

“This is another significant step forward in building cash flow through prudent M&A activity,” said GTT CFO Eric Swank. “This acquisition provides a great opportunity to leverage our CMD platform, by essentially porting the new circuits into our business, expanding our adjusted EBITDA in the process by layering on contract revenue from a very similar customer base. Due to these synergies, we expect the transaction to be immediately accretive.”

For Global Capacity, the deal enables it to migrate off-net circuit customers and improve its balance sheet through the sale of non-core assets, according to a press statement. The company further said it will invest in its core products – a global access pricing system, One Marketplace, network engineering and remote network management services.

Cowen and Company and Capstone Investments served as financial advisors to Global Capacity on this transaction.

“This agreement is a critical step in aligning the resources and focus of Global Capacity behind our core products, including our One Marketplace strategy,” said Global Capacity CEO Patrick Shutt. “The balance sheet improvements affected by this agreement enable Global Capacity to focus on executing our high-growth, high-margin product strategies, while insuring continuity of service for our current off-net customers. It is a win-win scenario for Global Capacity, for GTT, and most importantly, for our customers.”

Global Capacity is headquartered in Chicago, with operational centers in Waltham, Mass., and Manchester, England, It has offices in Houston; Glastonbury, Conn.; New York; London and Lisbon, Portugal.