A leading shareholder in FairPoint Communications has called on the US telco to begin an “aggressive sale” of roughly half its business, in a move which the investor estimates could raise US$500m.
Maglan Capital, FairPoint’s third largest…
A leading shareholder in FairPoint Communications has called on the US telco to begin an “aggressive sale” of roughly half its business, in a move which the investor estimates could raise US$500m.
Maglan Capital, FairPoint’s third largest shareholder with a 9% stake, has published a letter questioning the way the board is running the operator. It presented a three-point plan to turn around the company and create value for shareholders.
First, it said the board should establish a US$1.50 annual dividend to establish a stable share price for FairPoint above US$15. On 11 April, the stock closed at US$7.72 and over the past year the price has significantly fluctuated, moving as low as US$3.70 and as high as US$10.04.
Maglan’s second proposal is that the board begins a sale process for what it calls “Telecom Group” – FairPoint’s operations outside its “core business”, Northern New England Telephone Operations (NNE).
The investor said Telecom Group had solid cash flow but was unlikely to grow, and therefore FairPoint should sell assets so it can de-lever. This would leave it to focus on growing NNE.
Based on FairPoint’s recent sale of its Idaho business, at 6x EBITDA, Maglan believes Telecom Group could fetch US$500m, just under half of FairPoint’s enterprise value.
The firm’s final piece of advice was for FairPoint to review its capex levels and expense cutting measures.
FairPoint is yet to respond to the letter and could not be reached for comment.
The North Carolina-based operator filed for bankruptcy in 2009 and emerged in 2011.
It offers broadband, local and long-distance phone, television and other high-capacity data services to customers across 17 US states.
In 2012 it generated US$974m in revenues and reported long-term debt, net of current portion, of US$947m.
