Two publicly held regional network operators are joining forces according to an announcement this morning. Consolidated Communications and Enventis have agreed to an all stock transaction, with Consolidated buying Enventis's outstanding shares for a sum total of $350M.
Enventis operates a network in the upper Midwest centered on Minnesota, with a 4,200 route mile network extending into the surrounding states of Iowa, North Dakota, South Dakota and Wisconsin. They themselves ventured into M&A with the IdeaOne acquisition, adding metro fiber over in Fargo ND under their previous HickoryTech name.
For its part, Consolidated operates fiber in Texas, Illinois, California, Kansas, Missouri, and Pennsylvania. Not so long ago they bought SureWest, doubling their size and becoming one of the industry's consolidators.
Each company has a bit of ILEC and CLEC DNA, and each has both residential and enterprise customers. It seems like a pretty close match. The valuation for Enventis based on the trailing 12 months of EBITDA appears to be about 7.3.
The deal will create a combined entity that pro forma for the 12 months ending March 31, 2014 generated approximately $785M in revenue and $332M in adjusted EBITDA. They expect to find $14M in annual operating synergies, and they'll spend $17.4M in opex and $5.2M in capex over two years to get them.
The integration itself will probably not be too difficult, given that there is virtually no overlap between the two company's territories. It's more about scale, and perhaps the combined entity will look at further consolidation later on.