US-based ISP Consolidated Communications has agreed to acquire ISP SureWest Communications in a US$340.9m deal.
The companies said that SureWest shareholders can choose to exchange their common shares for either US$23 per share in cash, or for shares in…
US-based ISP Consolidated Communications has agreed to acquire ISP SureWest Communications in a US$340.9m deal.
The companies said that SureWest shareholders can choose to exchange their common shares for either US$23 per share in cash, or for shares in Consolidated that have an equivalent value.
This represents a 47% premium on SureWest’s stock price at the close on Friday 3 February.
The companies added that the exchange is subject to proration, which means that 50% of SureWest shares will be exchanged for cash and the other 50% for Consolidated shares.
Morgan Stanley and Wells Fargo are financial advisers to Consolidated and Schiff Hardin LLP is acting as legal adviser.
SureWest’s financial adviser is UBS and its legal adviser is Orrick, Herrington & Sutcliffe LLP.
The companies said that the deal is not subject to any financing conditions, but Morgan Stanley has provided Consolidated with US$350m in committed debt financing, which the ISP will use to pay the cash portion of the purchase price and to refinance SureWest’s debt.
The companies emphasised that the deal will give greater scale, with coverage in six states. The deal will also diversify revenue and cash flow streams across multiple customer bases and geographies, thereby providing “a platform for growth”.
The president and CEO of Consolidated, Bob Currey, said: “This transaction combines our cash flow generating business with SureWest’s growth oriented strategy resulting in a financially strong company with a robust balance sheet and attractive dividend payout ratio.”
Consolidated and SureWest said that the combined company would have had revenues of US$620m for the year up to 30 September 2011. They estimated that they would generate operational synergies of US$25m per year and capex synergies of US$5-10m per year.
The merger is subject to approval by regulators and the shareholders of both companies.
Illinois-based Consolidated and Sacramento-based SureWest both provide telephone, internet and digital TV services over their fibre networks.
Consolidated serves customers in Illinois, Pennsylvania and Texas, while SureWest serves California, Kansas and Missouri.
