An Illinois-based communications company announced today that it has entered into an agreement to purchase FairPoint Communications Inc.
Consolidated Communications Holdings Inc. will buy FairPoint for $1.5 billion.
Consolidated Communications, based in Mattoon, Ill., has communications networks in 11 states including Pennsylvania, Texas, California, Kansas, Iowa, Minnesota, Wisconsin, North Dakota and South Dakota. Consolidated uses a fiber optic network and data centers to sell access to internet, voice, video, managed services cloud computing and wireless backhaul.
FairPoint is based in North Carolina and currently provides phone service in 17 states to 1.6 million customers and internet to 230,000 customers. Most of the company’s customers and workforce are in Maine, New Hampshire and Vermont.
FairPoint is publicly traded on NASDAQ as FRP with a market capitalization of $446 million.
The merger acquisition combines the portfolios of both companies, bringing the total number of states served to 24. Officials with the company say the Consolidated Communications purchase will save $55 million through “estimated operating synergies.”
The agreement was unanimously approved by the boards of directors at both companies.
“This transaction combines two companies with extensive fiber networks and complementary strategies focusing on being the leading business and broadband solutions provider,” said Bob Udell, president and chief executive officer of Consolidated Communications. “This merger positions Consolidated to leverage its extensive product and services portfolio and consultative sales approach across 24 states bringing advanced solutions and a better experience to customers. We are well positioned to ensure a smooth transition for customers and employees as we leverage a solid track record of successful integrations.”
The dividend payout ratio will go up as a result of the “all-stock merger transfer” and improve the balance sheet through “deleveraging.”
“I am very proud of my team and our employees and all that we have accomplished in the last several years,” said Paul Sunu, chief executive officer of FairPoint. “This transaction offers a number of benefits for FairPoint’s shareholders including the enhanced scale of the combined company, the opportunity to benefit from the realization of synergies and the receipt of an attractive dividend going forward. I am confident the new combined company will accelerate our progress and bring numerous benefits to our customers, employees and shareholders. Together, FairPoint and Consolidated Communications create a highly competitive business and broadband company with a superior network to deliver a best-in-class experience to carrier, commercial and consumer customers.”
FairPoint shareholders will receive a 17.3 percent premium for stock. After the deal goes through, FairPoint shareholders will own 28.7 percent of the company; Consolidated shareholders will own 71.3 percent.
In the 12 months ending Sept. 30, 2016, the two companies generated more than $1.5 billion in combined revenue and $566 million in adjusted profits.
FairPoint operates a network of 21,000 fiber route miles; 17,000 miles of that network is located in New England.
Udell, who runs Consolidated, will serve as the president and CEO of the combined company and one member of the FairPoint board will join Consolidated Communications board of directors.
Last month, FairPoint announced companywide layoffs. In New England, 110 employees were handed pink slips; 20 jobs were eliminated in Vermont. FairPoint employs 2,600 workers, according to its website.
As of Sept. 30, FairPoint had a net debt of about $887 million. After the purchase, the combined debt of the two companies will be about $2.3 billion.