Manitoba Telecom Services sells Allstream business for $465M

Manitoba Telecom Services Inc.says it has signed a deal to sell its Allstream business to Zayo Group Holdings Inc. for $465 million in cash.

Allstream provides internet and other services to businesses and governments.

U.S.-listed Zayo says it wants to add Allstream's assets to its own communications infrastructure business.

After closing costs, MTS says it expects net proceeds of roughly $425 million.

The agreement to sell Allstream follows a failed deal to sell the business to Egyptian investment group Accelero Capital for $520 million.Ottawa blocked that agreement in 2013 due to national security concerns under the Investment Canada Act.

Under the deal, MTS has agreed to retain the pension obligations, and related pension plan assets related to retirees and other former employees under its defined benefit pension plans.

Allstream will retain the pension benefits related to current employees.

MTS has also agreed to reimburse Allstream for certain solvency funding payments that it may have to pay.