by Playfuls Staff |
18th September 2006
Citizens Communications Company and Commonwealth Telephone
Enterprises announced that they have entered into an agreement for Citizens to
acquire Commonwealth for $41.72 per share, in a cash-and-[more] stock taxable
transaction, for a total consideration of $1.16 billion, based on the closing
price of Citizens' common stock on September 15, 2006. Each Commonwealth share
will receive $31.31 in cash and 0.768 shares of Citizens' common stock, which
represents a 17% premium to Commonwealth's closing share price of $35.60 on
September 8, 2006, the business day prior to Commonwealth's announcement that
it was exploring strategic opportunities. The acquisition has been approved by
the Boards of Directors of both Citizens and Commonwealth.
Citizens intends to finance the cash portion of the
transaction with a combination of cash on hand and debt. Citizens has obtained
a commitment for the financing necessary to complete the acquisition from
Citigroup.
The combined company will be the 7th largest local
telephone exchange company in the U.S., with pro forma annual
revenues of approximately $2.4 billion and operations across 23 states. Upon
completion of the acquisition, Citizens, which operates under the brand name of
Frontier, will have approximately 2.6 million access lines, 388,000 High-Speed
Internet subscribers and 6,600 employees.
This acquisition expands Citizens' presence in Pennsylvania and
strengthens Citizens' position as a market-leading full-service communications
provider to rural markets. Citizens estimates that it will achieve annual cash
synergies of approximately $30 million. Synergies are expected to come
primarily from the elimination of corporate overhead, overlapping functions and
operational efficiencies from leveraging common systems.
The acquisition enhances Citizens' financial profile. The
acquisition maintains Citizens' strong balance sheet and enhances the
sustainability of the company's dividend program. Citizens is committed to
continuing its current annual dividend of $1.00 per share. This transaction
will improve the current payout ratio immediately. The company expects the
acquisition to be accretive to free cash flow in the first full year of
operation.
"Commonwealth has operated its Pennsylvania markets successfully for many
years. Mike Mahoney and his team have built a strong reputation, appropriately
invested in their network and cultivated positive relationships with their
communities. We will build on this momentum and overlay our full-service
communications products and solutions to enhance current offerings.
Financially, the structure allows us to remain flexible while maintaining our
strong balance sheet and improves our dividend payout ratio," commented
Maggie Wilderotter, Citizens' Chairman and CEO.
"Having reviewed a number of strategic opportunities,
we concluded that this was the right transaction at the right price for our
shareholders and other key constituencies," said Mike Mahoney, President
and CEO of Commonwealth. "Citizens has done a great job in their current Pennsylvania markets so
this acquisition is a logical extension of their reach and provides economies
of scale to remain competitive in the long run. We are also pleased with the
strong customer and operational focus that Citizens has demonstrated with their
current leadership, which we are confident will enhance the value of this
transaction to all of our shareholders and other constituents."
