USD 1.5 BN DEAL - Consolidated Communications to Acquire FairPoint Communications, Inc.
Consolidated Communications to Acquire FairPoint Communications, Inc.
- Creates a stronger business and broadband communications provider to better serve its customers
- Doubles revenue, adjusted EBITDA and provides significant scale and resources
- Increases fiber route miles to 35,100 across 24 states
- Adds more than 3,000 lit buildings and an extensive fiber-to-the-tower footprint
- Meaningfully cash flow per share accretive in year one with estimated operating synergies of $55 million and $300 million in NOLs
- Strengthens the dividend payout ratio and improves the balance sheet through deleveraging
- Consolidated to host conference call today at 8:30 am ET/7:30 am CT
MATTOON, Ill., Dec. 05, 2016 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) announced today it has entered into a definitive agreement to acquire FairPoint Communications, Inc. (NASDAQ:FRP), a business and broadband communications provider, in an all-stock merger transaction valued at approximately $1.5 billion, including debt. The agreement and the proposed merger have been unanimously approved by the boards of directors at both companies.
|
“This transaction combines two companies with extensive fiber networks and complementary strategies focusing on being the leading business and broadband solutions provider,” said Bob Udell, president and chief executive officer of Consolidated Communications. “This merger positions Consolidated to leverage its extensive product and services portfolio and consultative sales approach across 24 states bringing advanced solutions and a better experience to customers. We are well positioned to ensure a smooth transition for customers and employees as we leverage a solid track record of successful integrations.”
“I am very proud of my team and our employees and all that we have accomplished in the last several years,” said Paul Sunu, chief executive officer of FairPoint. “This transaction offers a number of benefits for FairPoint's shareholders including the enhanced scale of the combined company, the opportunity to benefit from the realization of synergies and the receipt of an attractive dividend going forward. I am confident the new combined company will accelerate our progress and bring numerous benefits to our customers, employees and shareholders. Together, FairPoint and Consolidated Communications create a highly competitive business and broadband company with a superior network to deliver a best-in-class experience to carrier, commercial and consumer customers.”
“The financial benefits associated with the combination in the form of synergies and reduced leverage provide us additional operating and strategic flexibility going forward,” Udell added. “The transaction is meaningfully accretive to free cash flow per share in the first year, strengthening the dividend payout ratio while maintaining our current dividend policy to shareholders.”
Under the terms of the agreement, FairPoint shareholders will receive a fixed exchange ratio of 0.7300 shares of Consolidated Communications common stock for each share of FairPoint common stock. This equates to a premium of 17.3 percent to the 30-day average exchange ratio as of Dec. 2, 2016. After closing, Consolidated’s shareholders will own approximately 71.3 percent of the pro forma combined company and FairPoint’s shareholders will own 28.7 percent.
On a pro forma basis, the combined company generated more than $1.5 billion in revenue and $566 million in adjusted EBITDA before synergies or $621 million after synergies for the 12 months ending Sept. 30, 2016. The combined markets are expected to strengthen Consolidated’s growth opportunities, enhancing its scale with a fiber-rich network that will extend across 24 states. Together, Consolidated Communications and FairPoint will expand upon the strong reputations each has built with its customers and in the communities they serve.
The transaction is expected to generate annual operating synergies of approximately $55 million, which are expected to be achieved within two years after completion of the merger.
FairPoint, based in Charlotte, N.C., has operations in 17 states with the largest network in northern New England. FairPoint operates a robust fiber network of approximately 21,000 fiber route miles. FairPoint had approximately $830 million in revenue for the trailing 12 months (TTM), ended Sept. 30, 2016. FairPoint has approximately 2,600 employees.
After the transaction closes, Bob Udell will continue to serve as president and chief executive officer of the combined company and one director from the FairPoint Board will join the Consolidated Communications Board of Directors. The combined company will retain the Consolidated Communications name and will be headquartered in Mattoon, Ill.
Dividend Practice
Consolidated Communications’ Board of Directors has declared a quarterly dividend of $0.38738 per share consistently for 46 quarters since its initial public offering in 2005. The Consolidated Communications Board of Directors expects to maintain its annual dividend of $1.55 per share after the transaction closes.
Debt Financing
As of Sept. 30, 2016, FairPoint had net debt of approximately $887 million. Pro forma for the transaction, the combined net debt of the combined company will be approximately $2.3 billion, which represents a 3.8x net leverage as of Sept. 30, 2016, down from Consolidated’s 4.4x net leverage as of Sept. 30, 2016. Consolidated Communications has secured committed debt financing in conjunction with the acquisition that in addition to cash on hand or other sources of liquidity, will be used to refinance FairPoint debt and pay fees and expenses associated with the transaction. Consolidated has received financing commitments from Morgan Stanley Senior Funding, Inc., MUFG, TD Securities (USA) LLC and Mizuho Bank, LTD.
Approvals and Anticipated Closing
The transaction is subject to standard closing conditions including federal and state regulatory approvals and the approval of both Consolidated Communications’ and FairPoint’s shareholders. The merger is expected to close by mid-2017.
Advisors
Morgan Stanley & Co. LLC acted as lead financial advisor on the transaction and rendered a fairness opinion to the Board of Directors of Consolidated Communications. Wells Fargo Securities, LLC and Foros acted as additional financial advisors and Schiff Hardin LLP acted as legal advisor to Consolidated Communications. Evercore acted as the sole financial advisor to FairPoint and rendered a fairness opinion to the Board of Directors of FairPoint. Paul Hastings acted as legal advisor to FairPoint.
Transaction Conference Call/Webcast
Consolidated Communications will host a conference call and webcast presentation to discuss the transaction today, Monday, Dec. 5 at 8:30 am ET. The live webcast and replay can be accessed from the “Investor Relations” section of Consolidated’s website at http://ir.consolidated.com. The live conference call dial-in number is 1-877-374-3981, conference ID 32185565. A telephonic replay of the conference call will be available through Dec. 12, 2016 and can be accessed by calling 855-859-2056.
About Consolidated Communications
Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) is a leading broadband and business communications provider throughout its 11-state service area. Consolidated Communications leverages its advanced fiber optic network and multiple data centers to offer a wide range of communications solutions, including data, voice, video, managed services, cloud computing and wireless backhaul. Headquartered in Mattoon, IL, Consolidated Communications has been providing services in many of its markets for more than a century. www.consolidated.com.
About FairPoint Communications, Inc.
FairPoint Communications, Inc. (Nasdaq:FRP) provides advanced data, voice and video technologies to single and multi-site businesses, public and private institutions, consumers, wireless companies and wholesale re-sellers in 17 states. Leveraging an owned, fiber-based Ethernet network — with more than 21,000 route miles of fiber, including approximately 17,000 route miles of fiber in northern New England — FairPoint has the network coverage, scalable bandwidth and transport capacity to support enhanced applications, including the next generation of mobile and cloud-based communications, such as small cell wireless backhaul technology, voice over IP, data center colocation services, managed services and disaster recovery. www.FairPoint.com.