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  1. #1
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    [EN] EarthLink in talks to merge with Windstream

    Liana B. Baker
    Nov 4, 2016


    Telecommunications firms Windstream Holdings Inc and EarthLink Holdings Corp are in talks to merge in an all-stock deal that would allow them to better compete against rivals, people familiar with the matter said.

    The transaction, which would result in Windstream owning slightly more than half of the combined company, could be announced as early as next week, according to the people, who asked not to be identified because the discussions were private.

    While the companies are in advanced discussions, no deal is final and talks could still fall apart, the people cautioned.

    Windstream, which provides telephone and Internet services to consumers in rural markets, declined to comment. EarthLink, which was an Internet pioneer in dial-up service in the 1990s, did not immediately respond to a request for comment.

    The companies have both struggled to find revenue growth in recent years and are expected to seek cost savings by combining their communications networks and infrastructure, the sources added.

    Windstream, based in Little Rock, Arkansas, had a market capitalization of about $653 million on Thursday while Atlanta-based EarthLink was valued at about $572 million.

    Windstream had $4.76 billion in long-term debt as of June 30 while Earthlink had $466 million in debt at the end of last quarter, according to filings.

    The merger, if completed, would come after larger rival CenturyLink Inc agreed to buy Level 3 Communications Inc in a deal valued at about $24 billion, with Centurylink keen to expand its reach in a crowded market that provides communications services to businesses.

    Both Windstream and Earthlink are scheduled to report third-quarter earnings on Monday.

    Last year Windstream completed a tax free spinoff of some of its assets into a publicly traded real estate investment trust (REIT) called Communications Sales and Leasing, Inc..

    In 2011, it bought a nationwide fiber network called PAETEC for $2.3 billion including debt. WindStream's sales and revenue fell 4.2 percent to $1.36 billion in its last reported quarter compared to a year ago.

    EarthLink has two parts to its business, a declining dial-up Internet service for consumers, and an Internet and data provider to small- and medium-sized businesses. The dial-up business launched in 1994 and was one of the first mainstream Internet providers, along with AOL and CompuServe.

    EarthLink posted revenue of $240 million in its last reported quarter, down 15.3 percent compared to a year ago.

    (Reporting by Liana B. Baker in San Francisco; Editing by Edwina Gibbs)

    http://www.reuters.com/article/us-wi...-idUSKBN12Z0E5

  2. #2
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    Windstream EarthLink Deal Hopes to Capitalize on Enterprise, SMB Growth Opportunity


    Combined Windstream- EarthLink Network (Source: Windstream)


    Bernie Arnason
    11/7/16

    An announced Windstream EarthLink deal has Little Rock, Ark. based Windstream acquiring Atlanta, Georgia based Earthlink for a total transaction value of $1.1 billion (including debt). The move follows an uptick in merger activity in the telecom sector, where carriers are looking to build scale and continue diversification beyond legacy services.

    EarthLink’s legacy is that of a ‘dotcom’ company that helped bring the Internet to the mainstream in the 1990’s and early 2000’s. They built an extensive dial-up Internet network, but successfully transitioned the company to an SMB and enterprise focused networking company in the last decade.

    “The combination will result in an extensive national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed services, voice, Internet and other value-added services,” states Windstream in a press release announcing the deal. “Customers will also benefit from combining Windstream’s scale in the Enterprise segment and EarthLink’s successful launch of SD-WAN.”

    Windstream is also transitioning their business from that of a rural focused ILEC, to that of a business and broadband services based network operator. They have been busily expanding their SMB and enterprise focus, by deploying more fiber assets.

    Windstream also divested their physical network assets into a REIT structure, a strategy they claimed would allow them to better re-focus. They also divested their data center assets to raise cash for broadband expansion.

    Windstream Strategy

    By combining the two companies, EarthLink and Windstream are gambling they can better compete together in the very competitive space of mid-level business services. Cable MSOs are quite active there and looking to grow market share. Incumbent telcos are strong there as well.

    Windstream joins a growing number of communications companies who are on a buying spree, looking for growth engines as traditional access and network services mature as a business. In some ways, this Windstream EarthLink deal is a ‘mini’ version of the recent CenturyLink Level 3 deal, where both companies are doubling down on enterprise and business segment opportunities for growth.

    Windstream’s larger brethren, AT&T and Verizon, are certainly maximizing their opportunities in that segment as well but are also looking outside of traditional telecom services. AT&T’s pursuit of Time Warner is an attempt to build a ‘mobile first’ entertainment empire, controlling both content and distribution. Verizon is pursuing ‘digital dollars’ in advertising and digital content through its Aol acquisition and its current pursuit of Yahoo.

    Windstream EarthLink Deal

    Transaction details include EarthLink shareholders receiving 0.818 shares of Windstream common stock for each EarthLink share owned. This represents a 13% premium to the average exchange ratio for EarthLink over the month ended Nov. 3, 2016. Windstream expects they will issue 93 million shares of stock valued at approximately $673 million to close the transaction. Windstream shareholders will own approximately 51% of the combined company, with EarthLink shareholders owning the remaining.

    Existing Windstream CEO Tony Thomas will serve as president and CEO of the combined company. “Key EarthLink management members are expected to join the combined company to bring best-in-class talent and ensure a smooth integration,” says Windstream in the press release.

    The EarthLink brand will eventually be retired with the combined company known as Windstream headquartered in Little Rock, Arkansas. Closing is expected by mid-2017, with customary regulatory approvals from federal and state regulators. Both Windstream and EarthLink shareholders need to approve the deal.

    http://www.telecompetitor.com/windst...h-opportunity/

  3. #3
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    PR: Windstream and EarthLink to Merge in $1.1 Billion Transaction

    Combination Creates a Stronger, More Competitive Company with Extensive National Footprint
    Spanning Approximately 145,000 Fiber Route Miles
    Enables Expanded Products, Services and Enhanced Enterprise Solutions for Customers
    Anticipated Annual Operating and Capital Expenditure Synergies of More than $125 Million
    Representing a Net Present Value of Approximately $900 Million, or More than $4.70 per Windstream
    Share and $3.85 per EarthLink Share
    Expected to be Significantly Accretive to Adjusted Free Cash Flow in Year One,
    Improving over Time as All Synergies are Realized
    Companies to Host Conference Call at 7:30 a.m. CST / 8:30 a.m. EST Today

    LITTLE ROCK, Ark. and ATLANTA , Nov. 07, 2016 (GLOBE NEWSWIRE) -- Windstream Holdings, Inc. (NYSE:WIN, news, filings) (“Windstream”) and EarthLink Holdings Corp. (NASDAQ:ELNK) (“EarthLink”) today announced that their boards of directors have unanimously approved a definitive merger agreement under which Windstream and EarthLink will merge in an all-stock transaction valued at approximately $1.1 billion, including debt.

    Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each EarthLink share owned. This ratio represents a 13 percent premium to the average exchange ratio of 0.721x over the month ended Nov. 3, 2016, the most recent unaffected trading day. Windstream expects to issue approximately 93 million shares of stock valued at approximately $673 million, based on the company’s closing stock price on Nov. 4, 2016. Upon closing of the transaction, Windstream shareholders will own approximately 51 percent and EarthLink shareholders will own approximately 49 percent of the combined company.

    The combined company will have increased scale and scope giving it the ability to leverage best practices across a broader platform, and offer customers expanded products, services and enhanced enterprise solutions. The combination will result in an extensive national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed services, voice, internet and other value-added services. Customers will also benefit from combining Windstream’s scale in the Enterprise segment and EarthLink’s successful launch of SD-WAN.

    “The combination with EarthLink further advances Windstream’s strategy by creating a stronger, more competitive business to serve our customers while increasing free cash flow and reducing leverage,” said Tony Thomas, president and chief executive officer at Windstream. “With this transaction, we are combining two highly complementary organizations with closely aligned operating strategies and business unit structures. We look forward to working with the talented EarthLink team to create significant benefits and drive value for all of our stakeholders.”

    “We are pleased to join forces with a company that shares our core values and operating philosophies, and whose strategy complements our own,” said EarthLink Chief Executive Officer and President Joe Eazor. “In our work with Tony and his team, it’s become clear that we are two companies on parallel paths. We’ve both made significant progress as evidenced by our improving financial results and strengthening balance sheets. Now is the right time for us to come together. We look forward to working with the Windstream team to better serve our customers in a world that is becoming more network-centric every day.”

    Compelling Strategic and Financial Benefits

    • Strengthens operating position through complementary networks and increased scale: The combined company will have a robust nationwide network and deep footprint of 145,000 fiber route miles, including strategic routes located in the Southeast and Northeast U.S. In addition, Windstream’s assets add significant value to EarthLink’s existing business by providing cost savings and increased sales opportunities.
    • Creates net present value of approximately $900 million from synergies, plus tax benefits: The companies have identified more than $125 million in annual operating and capital expense synergies that are expected to be fully realized within 36 months of closing. Approximately $50 million of these synergies are expected to be achieved within 12 months of closing and an incremental $50 million are expected to be achieved within 24 months. The remaining $25 million are expected to be realized within 36 months. The $125 million of synergies has a net present value of $900 million, representing value creation of more than $4.70 per Windstream share and $3.85 per EarthLink share after accounting for integration costs. These synergies will come primarily from the optimization of network and SG&A costs, the reduction of public company costs and the ability to leverage best practices and combined operating scale to drive efficiency. In addition to the synergies from operations, the combined company will benefit from EarthLink’s net operating losses, which are expected to have an estimated net present value of $95 million at closing.
    • Enhances balance sheet and increases free cash flow: Including run-rate synergies, on a pro forma basis for the 12 months ended Sept. 30, 2016, the combined company would have a net leverage ratio of 3.2x. Further, the transaction will be significantly accretive to Windstream’s adjusted free cash flow allowing greater financial flexibility for strategic network investments and debt reduction while increasing dividend coverage.


    Management Team, Board of Directors and Headquarters

    After the transaction closes, Tony Thomas will serve as president and chief executive officer and Bob Gunderman will serve as chief financial officer of the combined company. Key EarthLink management members are expected to join the combined company to bring best-in-class talent and ensure a smooth integration.

    Upon close, three of EarthLink’s existing directors will join the current Windstream board of directors, bringing the total number of directors of the combined company’s board to twelve.

    The combined company, which will retain the Windstream name, will be headquartered in Little Rock, Ark., and maintain offices in key U.S. markets.

    Dividend Practice and Debt Financing

    Consistent with Windstream’s current dividend practice, the board of directors expects to maintain Windstream’s annual dividend of $0.60 per share after the transaction closes, providing meaningful benefits to shareholders in the form of long-term capital returns.
    At the time of closing, Windstream intends to refinance EarthLink’s gross debt of approximately $436 million.

    Approvals and Anticipated Closing

    The transaction is expected to close in the first half of 2017. It is subject to the satisfaction of certain customary conditions, including approval by the Federal Communications Commission, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable state-level regulatory approvals and approval by Windstream and EarthLink shareholders.

    Advisers

    J.P. Morgan is acting as lead financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to Windstream in the transaction. Barclays also acted as financial adviser and delivered a fairness opinion to the Windstream board of directors in conjunction with the transaction.

    Foros is acting as lead financial adviser and has delivered a fairness opinion to EarthLink’s board of directors. Goldman Sachs & Co. is also acting as financial adviser to EarthLink’s board of directors. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Troutman Sanders LLP are acting as legal advisers to EarthLink in the transaction.

    Windstream and EarthLink Third Quarter 2016 Earnings Results

    In separate press releases issued today, Windstream and EarthLink announced their respective results for the third quarter of 2016. In light of today’s transaction and third quarter earnings results announcements, Windstream and EarthLink have cancelled their previously announced calls scheduled for Nov. 7, 2016, at 9:00 a.m. CST / 10:00 a.m. EST and 7:30 a.m. CST / 8:30 a.m. EST, respectively.

    http://newswire.telecomramblings.com...n-transaction/

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