Entry Into a Material Definitive Agreement.
On August 3, 2021, Lumen Technologies, Inc. (the “Company”)
and certain of its wholly-owned subsidiaries (collectively with the
Company, “Sellers”) entered into a Purchase Agreement (the
“Purchase Agreement”) with Connect Holding LLC, an affiliate of
funds advised by Apollo Global Management, Inc. (“Purchaser”), for
the purpose of divesting Sellers’ facilities-based incumbent local
exchange business conducted within 20 Midwestern and Southeastern
states (the “Divestiture”).
The Divestiture will be structured as the sale of the Acquired
Subsidiaries (as defined in the Purchase Agreement), which conduct
local exchange operations in Alabama, Arkansas, Georgia, Illinois,
Indiana, Kansas, Louisiana, Michigan, Missouri, Mississippi,
New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania,
South Carolina, Tennessee, Texas, Virginia and Wisconsin.
In exchange for the Acquired Subsidiaries, Purchaser has agreed to
pay $7.5 billion, subject to (i) offsets for assumed
indebtedness (expected to be approximately $1.4 billion) and
certain of Purchaser’s transaction expenses (estimated to be
approximately $245 million) and (ii) working capital and other
customary purchase price adjustments.
Upon consummating the Divestiture, affiliates of Purchaser and
Sellers plan to enter into various commercial agreements designed
to permit, among other things, the parties to continue to serve
their respective customers. In connection with the Divestiture,
Sellers plan to transfer to Purchaser pension assets and
liabilities currently estimated at $2.5 billion.
The Divestiture is subject to customary closing conditions,
the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
the authorizations required to be obtained from the Federal
Communications Commission and certain state public service or
public utility commissions; and
the absence of any legal restraint or order by any governmental
entity that has the effect of making the Divestiture illegal or
otherwise prohibiting the completion of the Divestiture.
For each of Sellers and Purchaser, the obligation to complete the
Divestiture is also subject to the accuracy of the representations
and warranties of, and compliance with covenants by, the other
party, in accordance with the materiality standards set forth in
the Purchase Agreement.
The Purchase Agreement provides that Sellers and Purchaser may
mutually agree to terminate the Purchase Agreement before
completing the Divestiture. In addition, either Sellers or
Purchaser may elect to terminate the Purchase Agreement under
various circumstances, including if the Divesture is not
consummated on or before the date that is 15 months after the date
of the Purchase Agreement, subject to extension by either party for
an additional two-month
period under certain circumstances.
Sellers and Purchaser have agreed to customary representations,
warranties and covenants in the Purchase Agreement, including
covenants (i) necessary to segregate Sellers’ divested
business from the Company’s other retained businesses and
(ii) with respect to conduct of the divested business prior to
the consummation of the Divestiture. Sellers have also agreed to
indemnify Purchaser for certain pre-closing taxes, litigation
liabilities and other matters.
A copy of the Purchase Agreement is attached hereto as Exhibit 2.1
and incorporated herein by reference. The foregoing description of
the Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the