Cincinnati Bell made two inorganic moves this morning, surging onto the consolidation stage in a rather unexpected way. will be paying The Midwestern service provider has signed a definitive agreements to combine with Hawaiian Telecom and to acquire OnX Enterprise Solutions.
In the first transaction, Cincinnati Bell will be paying approximately $650M for Hawaiian Telecom, whose shareholders will have the option to receive cash, stock, or a 60/40 combination. Like Cincinnati Bell, Hawaiian Telecom are both ILECs with a tight focus on a particular community, albeit ones a few thousand miles apart. Combined the two will have 14,000 route miles of fiber and 4,300 employees. Cincinnati Bell hopes to bring the success they've had in building out regional fiber across southwestern Ohio to a new geography. Two members of its board will be Hawaiian residents, and both companies will continue to be locally run. Hawaiian Telecom did $393M in revenue and $116M in adjusted EBITDA in 2016.
And in the second transaction, Cincinnati Bell will be paying $201M in cash to acquire OnX Enterprise Solutions. OnX specializes in IT services and will expand Cincinnati Bell's reach to 20+ IT sales offices and 50+ data centers around the continent. The deal adds key cloud integration capabilities to their portfolio. OnX had $614M in revenue but just $29M in adjusted EBITDA in the 12 months prior to April 30, 2017. Between the two deals, Cincinnati Bell expects to generate synergies of $21M annually within the first two years after closing.
The OnX deal should be done in Q4, but regulatory hurdles and such make the target for the Hawaiian Telecom deal the second half of 2018. That will give us time to figure out just what Cincinnati Bell has in mind going forward.