Sprint (NYSE:S) affiliate Shenandoah Telecommunications (Shentel) has agreed to buy regional wireless carrier NTelos (NASDAQ:NTLS) in an all-cash deal worth US$640m, including net debt.
Shentel and Sprint have also entered into a series of agreements,…
Sprint (NYSE:S) affiliate Shenandoah Telecommunications (Shentel) has agreed to buy regional wireless carrier NTelos (NASDAQ:NTLS) in an all-cash deal worth US$640m, including net debt.
Shentel and Sprint have also entered into a series of agreements, which include extending their ‘affiliate’ relationship, NTelos said in a statement. This will see NTelos’ 297,500 wireless customers become Sprint-branded customers and the ‘nTelos’ brand discontinued. Shentel will take over the management of NTelos retail stores, which will also adopt Sprint branding.
Shentel said the deal more than doubles its customer base and increases its geographic footprint in the Mid-Atlantic region, positioning it as one of the top six public wireless service providers in the US.
Shareholders in Waynesboro, Virginia-based NTelos will receive US$208m in cash, or US$9.25 per share, representing a 60% premium over the 30-day, volume-weighted average price of its stock as of 7 August.
Shentel will take on NTelos’ US$431m in net debt as of 30 June, adjusted for the expected wind-down of Eastern Markets commercial obligations, which Ntelos expects to complete by 15 November.
Wells Fargo analyst Jennifer Fritzsche said the price tag corresponds to 4.9x her forecasted YE2016 EBITDA for NTelos on a straight multiple, while the transaction multiple would be 5.3x. The latter multiple is considerably below historical multiples for regional wireless companies, she noted.
“We note Sprint will receive certain spectrum assets and agreed to reduce its retained revenues otherwise due to Sprint by US$252m over a five to six-year period, as well as certain NTLS discounted receivables,” she said.
Shentel will finance the deal, already approved by both boards of directors, with a new, expanded credit facility. The deal is expected to close in early 2016 subject to approvals by federal and state regulators, NTelso shareholders and the completion of Shentel’s re-affiliation transaction with Sprint. Quadrangle Capital Partners, which owns about 18% of NTelos’ common stock, has agreed to vote in favour of the merger.
UBS and Stephens acted as financial advisers to Ntelos, while Mayer Brown provided legal advice. Moelis reportedly advised Shentel.
CEO Rod Dir said the deal provides NTelos shareholders with a liquidity event at an attractive premium.
“We view the acquisition as a combination between two great companies, both of which have strong roots in our local communities,” he said, adding that he believes Sprint customers will benefit from NTelos’ high-quality wireless network and robust retail presence.
According to Fritzsche, upon closing Shentel is expected to have a network covering 4.3 million points of presence (POPs), more than one million subscribers and a licenced market area of 5.4 million POPs.
She noted that Shentel has extended its agreement with Sprint by five years to 2029 and that a net service fee will be reduced from 14% to 8.6% from 1 January 2016.
Shentel said it will invest over US$300m to upgrade and expand the NTelos network, work that will include adding an extra 150 coverage sites.