Consolidated To Buy SureWest

February 6th, 2012 by · Leave a Comment

Hybrid RLEC/CLEC Consolidated Communications (NASDAQ:CNSL, news, filings) said today that it is making a major M&A move by purchasing surw. SureWest operates last mile networks for both residential and business customers in Kansas City and Sacramento, while Consolidated Communications operates in Illinois, Pennsylvania and Texas.

While there’s not much overlap in territory, the combination has other strategic reasons that made it attractive to both. SureWest has a growing business without enough cash to really make it sing, while Consolidated’s rural ILEC business gives it better cash flow but fewer growth prospects to apply it to. SureWest also has a few NOLs that Consolidated will be able to put to good use.  The combined company should have the scale to make more headway than either has been able to alone.

The purchase price is $23 per share in a combination of cash and stock, a hefty 47% premium above Friday’s close. Including net debt, that puts the total purchase price at about $535M: $340M plus $195M. Consolidated has arranged financing of $350M through Morgan Stanley for the cash portion plus the refinancing of SureWest’s debt.

The combined company’s pro forma revenues for the 12 months ending 9/30/2011 would have been $620M, with about 60% of that from Consolidated and 40% from SureWest. Synergies are expected to be $25M in opex and $5-10M in capex annually. Integration spending is expected to be about $20-25M over two years.  Because the territories don’t overlap much, there probably won’t be as many layoffs involved as there might be in some other such deals.  There will be some, of course, as there always are.

Both Consolidated and SureWest have not gotten the attention from Ramblings that perhaps they should have (there are only so many of me you know), but it seems like I ought to correct that in 2012.

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Categories: CLEC · FTTH · ILECs, PTTs · Mergers and Acquisitions

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