Windstream Corporation (NYSE: WIN) announced today that it has
entered into a definitive agreement to acquire Iowa
Telecommunications Services, Inc. (NYSE: IWA), based in Newton,
Iowa, in a transaction valued at approximately $1.1 billion.
Iowa Telecom shareholders will receive 0.804 shares of
Windstream stock and $7.90 in cash per each Iowa Telecom share
under terms of the agreement approved by the boards of directors of
both companies. Windstream expects to issue approximately 26.5
million shares of stock valued at approximately $269 million, based
on the company’s closing stock price on Nov. 23, 2009, and pay
approximately $261 million in cash as part of the transaction.
Windstream also will repay estimated net debt of approximately $598
million. Windstream intends to finance the cash portion of the
transaction and the repayment of Iowa Telecom’s outstanding
indebtedness with the proceeds from a debt financing or additional
bank borrowings.
“These are well-run, profitable properties in very rural service
areas that expand our presence in the Upper Midwest and grow our
free cash flow per share,” said Jeff Gardner, president and CEO of
Windstream. “I also am pleased to have Alan join our company’s
board of directors. His financial acumen and executive management
experience will be a tremendous asset.”
“This is an excellent transaction for our shareholders, and for
the customers that we serve,” said Alan L. Wells, Iowa Telecom
Chairman and CEO. “Windstream is a leader in our industry, and Jeff
Gardner and his team have done an outstanding job of profitably
growing their business in challenging times. Windstream shares our
commitment to both customer service and shareholder value, and
we’re very pleased that our company will be joining the Windstream
organization.”
Windstream estimates the transaction will be accretive to free
cash flow in the first year following the closing after expected
annual synergies of approximately $35 million in operating expenses
and capital expenditure savings and excluding integration charges.
The transaction also includes tax assets with an estimated net
present value of approximately $130 million.
The transaction is expected to close in mid-2010, subject to
certain conditions, including necessary approvals from federal and
state regulators and Iowa Telecom shareholders.
Iowa Telecom provides communications services to residential and
business customers in Iowa and Minnesota. The company has
approximately 256,000 access lines, about 95,000 high-speed
Internet customers and about 26,000 digital TV customers. The
company has approximately 11 access lines per square mile across
its service areas and operates an extensive fiber and IP
network.
The transaction also includes Iowa Telecom’s 15 FCC Advanced
Wireless Service licenses and three 700 MHz Band licenses.
Iowa Telecom has approximately 800 employees, including about
350 at its corporate headquarters in Newton. Windstream will
maintain an operating presence in the headquarters building and
plans to expand the existing call center.
On a pro forma basis for the acquisition of Sherburne Tele
Systems, Inc. in the twelve months ended Sept. 30, 2009, Iowa
Telecom generated approximately $275 million in revenue; $130
million in operating income before depreciation and amortization
(OIBDA), which excludes merger and integration costs; and $69
million in free cash flow, which is defined as net cash from
operations less capital expenditures.
On a pro forma basis following completion of the company’s
pending transactions with Lexcom, NuVox and Iowa Telecom, as well
as the recently completed acquisition of D&E Communications,
Windstream will have approximately $4 billion in revenue and about
$2 billion in OIBDA, excluding non-cash pension and merger and
integration expenses.
“Windstream has extensive experience with successfully
integrating new properties. The transactions we have announced this
year are scheduled to close in an orderly fashion over a period of
time providing the opportunity for very manageable integrations,”
Gardner said. “Each of these companies is extremely well run, and
we are very far along in our integration planning.”
Additional Information
Stephens Inc., Goldman, Sachs & Co. and BofA Merrill Lynch
are acting as financial advisers and Skadden, Arps, Slate, Meagher
& Flom LLP as legal adviser to Windstream on the transaction.
J.P. Morgan Securities Inc. and Fredrikson & Byron, P.A. are
acting as financial advisers and legal advisers to Iowa
Telecom.
Non-GAAP Financial Measures
This press release references the non-GAAP financial measure
OIBDA for the twelve months ended Sept. 30, 2009 on a pro forma
basis. A reconciliation of this measure to the most directly
comparable GAAP measure is presented below:
Operating
income under GAAP: $60 million Merger and integration costs: $ 2
million Sherburne Tele Systems pro forma adjustment: $ 8 million
Depreciation and amortization:
+ $60 million
OIBDA: $130 million
This press release also references the non-GAAP financial
measure free cash flow for the twelve months ended Sept. 30, 2009
on a pro forma basis. A reconciliation of this measure to the most
directly comparable GAAP measure is presented below:
Cash flows
from Operations under GAAP: $86 million Capital expenditures:
($24) million
Merger and integration costs: $ 2 million Sherburne Tele Systems
pro forma adjustment:
+$
5 million
Free cash flow: $69 million
Cautionary Statement Regarding Forward-Looking
Statements
Windstream claims the protection of the safe-harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements,
including statements regarding the completion of the acquisition
and expected benefits of the acquisition, are subject to
uncertainties that could cause actual future events and results to
differ materially from those expressed in the forward-looking
statements. These forward-looking statements are based on
estimates, projections, beliefs and assumptions that Windstream
believes are reasonable but are not guarantees of future events and
results. Actual future events and results of Windstream may differ
materially from those expressed in these forward-looking statements
as a result of a number of important factors. Factors that could
cause actual results to differ materially from those contemplated
above include, among others: receipt of required approvals of
regulatory agencies; the possibility that the anticipated benefits
from the acquisition cannot be fully realized or may take longer to
realize than expected; the possibility that costs or difficulties
related to the integration of Iowa Telecom operations into
Windstream will be greater than expected; the ability of the
combined company to retain and hire key personnel; and those
additional factors under the caption “Risk Factors” in Windstream’s
Form 10-K for the year ended Dec. 31, 2008 and in subsequent
Securities and Exchange Commission filings. In addition to these
factors, actual future performance, outcomes and results may differ
materially because of more general factors including, among others,
general industry and market conditions and growth rates, economic
conditions, and governmental and public policy changes. Windstream
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. The foregoing review of factors that could cause
Windstream's actual results to differ materially from those
contemplated in the forward-looking statements should be considered
in connection with information regarding risks and uncertainties
that may affect Windstream's future results included in
Windstream’s filings with the Securities and Exchange Commission at
www.sec.gov.
Additional Information and Where to Find It
This press release may be deemed to be solicitation material in
respect of the proposed merger of Iowa Telecom and Windstream. In
connection with the proposed merger, Windstream will file a
Registration Statement on Form S-4 with the SEC that will contain a
proxy statement/prospectus. Iowa Telecom investors and security
holders are advised to read the proxy statement/prospectus and any
other relevant documents filed with the SEC when they become
available because those documents will contain important
information about Iowa Telecom, Windstream and the proposed
merger. The final proxy statement/prospectus will be mailed to
shareholders of Iowa Telecom. Investors and security holders may
obtain a free copy of the proxy statement/prospectus when it
becomes available at the SEC’s Web site at www.sec.gov. Free copies
of the proxy statement/prospectus, when it becomes available, may
also be obtained from Windstream upon written request to Windstream
Investor Relations, 4001 Rodney Parham Road, Little Rock, AR 72212
or by calling (866) 320-7922, or from Iowa Telecom upon written
request to Iowa Telecommunications Services, Inc., 403 W. Fourth
Street North, Newton, IA 50208 or by calling 1-641-787-2089. This
communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
About Windstream
Windstream Corporation is an S&P 500 company that provides
phone, high-speed Internet and high-definition digital TV services
to customers in 16 states. The company also offers a wide range of
IP-based voice and data services and advanced phone systems and
equipment to businesses and government agencies. The company has
approximately 3 million access lines and about $3.1 billion in
annual revenues. Windstream is ranked 4th in the 2009 BusinessWeek
50 ranking of the best performing U.S. companies. For more
information about Windstream, visit www.windstream.com.
About Iowa Telecom
Iowa Telecommunications Services, Inc. (d/b/a Iowa Telecom) is a
telecommunications service provider that offers local telephone,
long distance, Internet, broadband and network access services to
business and residential customers. Today, the Company and its
subsidiaries serve over 450 Iowa communities, 10 Minnesota
communities and employs approximately 800 people. The Company’s
headquarters are in Newton, Iowa. The Company trades on the New
York Stock Exchange under the symbol IWA. For further information
regarding Iowa Telecom, please go to www.iowatelecom.com and select
“Investor Relations.” The Iowa Telecom logo is a registered
trademark of Iowa Telecommunications Services, Inc. in the United
States.
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