Consolidated Communications Holdings Inc. (NASDAQ: CNSL) saw its shares pull back early Monday, after the company announced that it will acquire FairPoint Communications Inc. (NASDAQ: FRP). This will be an all-stock merger transaction that is valued up to $1.5 billion, including debt.
Both boards of directors have unanimously approved the transaction. The transaction is expected to close by mid-2017 and is still subject to regulatory approvals.
Under the terms of the agreement, FairPoint shareholders will receive a fixed exchange ratio of 0.7300 shares of Consolidated Communications common stock for each share of FairPoint common stock. This equates to a premium of 17.3% to the 30-day average exchange ratio as of December 2. After the deal closes, Consolidated’s shareholders will own roughly 71.3% of the pro forma combined company and FairPoint’s shareholders will own 28.7%.
On a pro forma basis, the combined company generated more than $1.5 billion in revenue and $566 million in adjusted EBITDA before synergies or $621 million after synergies for the 12 months ending September 30, 2016.
The transaction is expected to generate annual operating synergies of approximately $55 million, which are expected to be achieved within two years after completion of the merger.
After the transaction closes, Bob Udell will continue to serve as president and chief executive of the combined company, and one director from the FairPoint board will join the Consolidated Communications board of directors. The combined company will retain the Consolidated Communications name.
This transaction combines two companies with extensive fiber networks and complementary strategies focusing on being the leading business and broadband solutions provider. 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.
Shares of Consolidated Communications were last trading down about 4% at $27.26, with a consensus analyst price target of $22.00 and a 52-week trading range of $17.76 to $30.23.
FairPoint shares were up more than 11% at $18.95. The consensus price target is $15.50, and the 52-week range is $12.69 to $19.50.