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Consolidated to buy SureWest Communications for $340.9M

Mon, 02/06/2012 - 3:05pm
Mike Robuck

In a move that merges two Tier 2 service providers, Consolidated Communications Holdings announced this morning that it was buying SureWest Communications for roughly $340.9 million in cash and stock.

Roseville, Calif.-based SureWest serves 130,000 residential and 15,700 business customers, primarily in Sacramento, Calif., and to a lesser extent in Kansas City, Mo. Consolidated, which is based in Matoon, Ill., offers triple-play services in its home state, Pennsylvania and Texas.

The combined company would offer services across six states with approximately 1,775 employees. On a pro forma basis, for the 12 months ending Sept. 30, the combined company would have had revenues of approximately $620 million.

"This transaction combines our cash flow-generating business with SureWest's growth-oriented strategy, resulting in a financially strong company with a robust balance sheet and attractive dividend payout ratio," said Bob Currey, Consolidated's president and CEO. "SureWest has built one of the highest-quality networks in the industry and transformed itself into a leading broadband provider. The combined company will create a broader platform from which to expand our products and services to meet the demands of our customers. We look forward to working with the SureWest employees to grow the business."

The deal is expected to generate annual operating synergies of approximately $25 million and annual capital expenditure synergies of $5 million to $10 million, which are expected to be fully realized by the end of the first full year after the deal closes.

Consolidated expects to incur merger and integration costs, excluding closing costs, of approximately $20 million to $25 million over the first two years following closing.

"Both Consolidated and SureWest have a long history of delivering the highest-quality products and services to its customers," said SureWest President and CEO Steve Oldham. "From a customer perspective, the transaction creates scale by combining our proven capabilities in delivering leading-edge digital TV and broadband services as a stronger, more competitive communications company. We believe the transaction is in the best interests of our company, our customers, our communities and our shareholders."

Also, Consolidated stands to benefit from SureWest's net operating losses of approximately $67 million, as of Sept. 30. The merger is subject to standard closing conditions, including federal and state regulatory approvals and the approval by both Consolidated and SureWest shareholders.

Under the terms of the deal, Consolidated will pay $23 for each SureWest share, or an equal amount of Consolidated common stock. The per-share price represented a 47 percent premium to SureWest's Friday closing stock price.

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