Windstream said that it has entered into a definitive agreement to buy Iowa Telecommunications Services, in a transaction valued at approximately $1.1 billion.
Under terms of the agreement, Iowa Telecom shareholders will receive 0.804 shares of Windstream stock and $7.90 in cash per each Iowa Telecom share. Windstream expects to issue approximately 26.5m shares of stock valued at $269m, and pay approximately $261m in cash as part of the transaction. Windstream also will repay estimated net debt of approximately $598m.
Jeff Gardner, president and CEO of Windstream, said: “These are well-run, profitable properties in very rural service areas that expand our presence in the Upper Midwest and grow our free cash flow per share. I also am pleased to have Alan join our company’s board of directors. His financial acumen and executive management experience will be a tremendous asset.”
Iowa Telecom provides communications services to residential and business customers in approximately 460 Iowa and Minnesota communities. The company serves about 256,000 access lines, 95,000 high-speed internet customers and 26,000 digital TV customers.
Windstream expects the transaction to be accretive to free cash flow in the first year following the closing after expected annual synergies of approximately $35m in operating expenses and capital expenditure savings and excluding integration charges. The transaction also includes tax assets with an estimated net present value of approximately $130m.
Alan Wells, chairman and CEO of Iowa Telecom, said: “As the telecommunications industry changes, it has become clear that we need to increase the size and scale of our operations in order to continue to offer our customers the services they need. This has been a difficult decision, but we firmly believe that the combination with Windstream is in the best interest of our company, our customers and our shareholders.”
The transaction is expected to close in mid-2010, subject to certain conditions, including necessary approvals from federal and state regulators and Iowa Telecom shareholders.