2/6/2012 8:27 AM ET
(RTTNews) - Consolidated Communications Holdings, Inc. (CNSL: News ) has agreed to acquire SureWest Communications (SURW: News ) for $23 per share, or a total of about $340.9 million, excluding debt, the two telecommunication service providers said Monday. Following the announcement, shares of SureWest are gaining more than 9 percent in pre-market trading.
The offer price represents a 47 percent premium to SureWest's closing stock price on Friday, February 3, 2012.
Under the terms of the deal, SureWest's shareholders may elect to receive $23 in cash or shares of Consolidated common stock that have an equivalent value based on average trading prices for the 20-day period ending two days prior to the closing of the acquisition, subject to a collar.
Overall elections are subject to proration such that Surewest shares will be exchanged 50 percent for cash and 50 percent for stock.
The deal is subject to standard closing conditions as well as the approval by shareholders of both companies, but is not subject to any financing conditions.
Morgan Stanley Senior Funding, Inc. has provided Consolidated with $350 million of committed debt financing, which will be used to refinance SureWest's debt and pay for the cash portion of the purchase price.
The transaction will be accretive to Consolidated's free cash flow per share in the first full year following closing, excluding integration costs, and is deleveraging to the company.
The two companies noted that the deal provides enhanced scale with operations in six states and about 1,775 employees. On a pro forma basis, the combined company would have revenues of about $620 million for the twelve months ending September 30, 2011.
Roseville, California-based SureWest currently serves 130,000 residential subscribers and 15,700 commercial businesses in the greater Kansas City and Sacramento regions, which contain over 321,700 residential marketable homes to SureWest.
Mattoon, Illinois-based Consolidated provides services including voice, data and video services to residential and business customers in Illinois, Pennsylvania and Texas.
The companies expect the transaction to generate annual operating synergies of about $25 million and annual capital expenditure synergies of $5 million to $10 million that are expected to be fully realized by the end of the first full year after close on a run-rate basis.
Consolidated Communications expects to incur merger and integration costs, excluding closing costs, of about $20 million to $25 million over the first two years following closing.
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