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 ClosingThe
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 CommunicationsConsolidated
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.
Safe HarborThe Securities and Exchange
Commission (“SEC”) encourages companies to disclose forward-looking
information so that investors can better understand a company’s
future prospects and make informed investment decisions.
Certain statements in this press release are forward-looking
statements and are made pursuant to the safe harbor provisions of
the Securities Litigation Reform Act of 1995. These
forward-looking statements reflect, among other things, current
expectations, plans, strategies, and anticipated financial results
of Consolidated Communications Holdings, Inc. (the “Company”) and
FairPoint, both separately and as a combined entity. There
are a number of risks, uncertainties, and conditions that may cause
the actual results of the Company and FairPoint, both separately
and as a combined entity, to differ materially from those expressed
or implied by these forward-looking statements. These risks
and uncertainties include the timing and ability to complete the
proposed acquisition of FairPoint by the Company, the expected
benefits of the integration of the two companies and successful
integration of FairPoint’s operations with those of the Company and
realization of the synergies from the integration, as well as
a number of factors related to the respective businesses of the
Company and FairPoint, including economic and financial market
conditions generally and economic conditions in the Company’s and
FairPoint’s service areas; various risks to stockholders of not
receiving dividends and risks to the Company’s ability to pursue
growth opportunities if the Company continues to pay dividends
according to the current dividend policy; various risks to the
price and volatility of the Company’s common stock; changes in the
valuation of pension plan assets; the substantial amount of debt
and the Company’s ability to repay or refinance it or incur
additional debt in the future; the Company’s need for a significant
amount of cash to service and repay the debt and to pay dividends
on the common stock; restrictions contained in the debt agreements
that limit the discretion of management in operating the business;
legal or regulatory proceedings or other matters that impact the
timing or ability to complete the acquisition as contemplated,
regulatory changes, including changes to subsidies, rapid
development and introduction of new technologies and intense
competition in the telecommunications industry; risks associated
with the Company’s possible pursuit of acquisitions; system
failures; losses of large customers or government contracts; risks
associated with the rights-of-way for the network; disruptions in
the relationship with third party vendors; losses of key management
personnel and the inability to attract and retain highly qualified
management and personnel in the future; changes in the extensive
governmental legislation and regulations governing
telecommunications providers and the provision of
telecommunications services; telecommunications carriers disputing
and/or avoiding their obligations to pay network access charges for
use of the Company’s and FairPoint’s network; high costs of
regulatory compliance; the competitive impact of legislation and
regulatory changes in the telecommunications industry; liability
and compliance costs regarding environmental regulations; the
possibility of disruption from the integration of the two companies
making it more difficult to maintain business and operational
relationships; the possibility that the acquisition is not
consummated, including, but not limited to, due to the failure to
satisfy the closing conditions; the possibility that the merger may
be more expensive to complete than anticipated, including as a
result of unexpected factors or events; and diversion of
management’s attention from ongoing business operations and
opportunities. A detailed discussion of risks and
uncertainties that could cause actual results and events to differ
materially from such forward-looking statements are discussed in
more detail in the Company’s and FairPoint’s respective filings
with the SEC, including the Annual Report on Form 10-K of the
Company for the year ended December 31, 2015, which was filed with
the SEC on February 29, 2016, under the heading “Item 1A—Risk
Factors,” and the Annual Report on Form 10-K of FairPoint for the
year ended December 31, 2015, which was filed with the SEC on March
2, 2016, under the heading “Item 1A—Risk Factors,” and in
subsequent reports on Forms 10-Q and 8-K and other filings made
with the SEC by each of the Company and FairPoint. Many of these
circumstances are beyond the ability of the Company and FairPoint
to control or predict. Moreover, forward-looking statements
necessarily involve assumptions on the part of the Company and
FairPoint. These forward-looking statements generally are
identified by the words “believe,” “expect,” “anticipate,”
“estimate,” “project,” “intend,” “plan,” “should,” “may,” “will,”
“would,” “will be,” “will continue” or similar expressions.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements of the Company and FairPoint, and their
respective subsidiaries, both separately and as a combined entity
to be different from those expressed or implied in the
forward-looking statements. All forward-looking statements
attributable to us or persons acting on the respective behalf of
the Company or FairPoint are expressly qualified in their entirety
by the cautionary statements that appear throughout this press
release. Furthermore, forward-looking statements speak only
as of the date they are made. Except as required under the
federal securities laws or the rules and regulations of the SEC,
each of the Company and FairPoint disclaim any intention or
obligation to update or revise publicly any forward-looking
statements. You should not place undue reliance on
forward-looking statements.
Important Merger Information and Additional
Information
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. In connection with the proposed
transaction, the Company and FairPoint will file relevant materials
with the SEC. The Company will file a Registration Statement
on Form S-4 that includes a joint proxy statement of the Company
and FairPoint and which also constitutes a prospectus of the
Company. The Company and FairPoint will mail the final joint
proxy statement/prospectus to their respective stockholders.
Investors are urged to read the joint proxy
statement/prospectus regarding the proposed transaction when it
becomes available, because it will contain important
information. The joint proxy statement/prospectus
and other relevant documents that have been or will be filed by the
Company and FairPoint with the SEC are or will be available free of
charge at the SEC’s website, www.sec.gov, or by directing a request
when such a filing is made to Consolidated Communications Holdings,
Inc., 121 South 17th Street, Mattoon, IL 61938, Attention: Investor
Relations or to FairPoint Communications, Inc., 521 East Morehead
Street, Suite 500, Charlotte, North Carolina 28202, Attention:
Secretary.
The Company, FairPoint and certain of their respective
directors, executive officers and other members of management and
employees may be considered participants in the solicitation of
proxies in connection with the proposed transaction.
Information about the directors and executive officers of
the Company is set forth in its definitive proxy statement, which
was filed with the SEC on March 28, 2016. Information about the
directors and executive officers of FairPoint is set forth in its
definitive proxy statement, which was filed with the SEC on March
25, 2016. These documents can be obtained free of
charge from the sources listed above. Investors may obtain
additional information regarding the interests of such participants
by reading the joint proxy statement/prospectus the Company and
FairPoint will file with the SEC when it becomes available.
Contacts:
Jennifer Spaude, Consolidated Communications
jennifer.spaude@consolidated.com
507-386-3765
Paul Taaffe, FairPoint
ptaaffe@fairpoint.com
(704) 227-3623
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