Why the Alaska Telecom Transaction Makes Sense
General Communication has entered into a definitive agreement with Alaska Communications Systems Group Inc. to purchase its wireless subscriber base and a 33% partnership interest in a new jointly-owned company
General Communication Inc. (NASDAQ: GNCMA) has entered into a definitive agreement with Alaska Communications Systems Group Inc. (NASDAQ: ALSK) to purchase its wireless subscriber base and a 33% partnership interest in a new jointly owned company for $300 million. At the end of September, Alaska Communications had roughly 109,000 wireless customers.
Both companies have agreed on a service transition plan for Alaska Communications customers. This will ensure a seamless continuation of service as they are transitioned to GCI. The move will also lower debt and decrease leverage for Alaska Communications. The company claimed that it will reduce debt by $250 million and will create synergies of $12 million.
The press release further detailed the transaction:
GCI will purchase Alaska Communications’ 33 percent interest in AWN and will then own 100 percent of AWN. Upon close, these agreements will eliminate future preferred and partnership distributions that otherwise would have been due under the original AWN agreements. Up until close Alaska Communications will continue to receive preferred distributions from AWN.
Alaska Communications President and CEO Anand Vadapalli and GCI President and CEO Ron Duncan said in a joint statement:
We are pleased to reach these agreements that allow each company to pursue its own strategy. We are committed to a seamless service transition for wireless customers. Alaskans will continue to benefit from a vibrant competitive market for wireless services.
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The transaction is targeted to close in the first quarter of 2015. 24/7 Wall St. previously visited this transaction back in 2013, although our view was on that the companies should perhaps just merge. After all, how many small players do Alaskan consumers really need?
Shares of Alaska were up over 48% at $1.84 in mid-day trading on Friday. The stock has a consensus analyst price target of $2.00 and a 52-week range of $1.65 to $2.17. Shares of General Communication were down less than 1% at $12.20 in mid-day trading. The consensus price target is $12.00, and the 52-week trading range is $9.11 to $12.50.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
