Back in September, privately held CLEC One Communications threw its hat into the M&A ring, hiring Blackstone to help it explore strategic alternatives following its sale of its FiberNet business. According to a Reuters article, final bids were due on Tuesday (Dec 7), exactly ninety days later. The sale process is described as lukewarm, however the sellers appear motivated and hence I expect we will hear of a deal soon.
The likely bidders for the assets are said to be PAETEC and Earthlink. As I noted back in September, PAETEC (news, filings) is an obvious candidate given their known interest in further purchases and experience with similar assets. The footprint of One communications also has quite a bit of overlap with that of the Intellifiber assets they just acquired in the Cavalier acquisition.
My other though at the time was some sort of consolidation with Deltacom, which itself was then bought by Earthlink (NASDAQ:ELNK, news, filings) - so perhaps Earthlink is thinking along the same lines as me. However, since the territorial overlap between Deltacom and One Communications is minimal, Earthlink's potential synergies are probably smaller and therefore I think this auction is PAETEC's to lose.
Supposedly, One's financial and operating performance has been deteriorating, and thus there probably won't be much of a premium. The Reuters article gives a price tag of somewhere between $500M and $1B, which is another way of saying they haven't got a clue except that One Communications has a net debt of $450M so $500M seems like the bottom.
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