Consolidated Communications Reaches a Definitive Merger Agreement to Acquire North Pittsburgh Systems, Inc. for $375.1 Million
Share:
o Expands Consolidated's Markets by Adding over 127,000 Access Line Equivalents -
o Free Cash Flow Accretive in First Year -
o Maintains Current Dividend and Improves Payout Ratio -
MATTOON, Ill. and GIBSONIA, Pa., July 2 -- Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) announced today that it has entered into a definitive agreement to acquire North Pittsburgh Systems, Inc. (NASDAQ:NPSI) for $25 per share in a taxable cash and stock transaction with a total consideration of $375.1 million, based on Consolidated's June 29, 2007 closing price. This represents a 17.6 percent premium over North Pittsburgh's closing price on June 29, 2007. North Pittsburgh shareholders may elect to exchange each share of North Pittsburgh common stock for either $25 in cash or 1.1061947 shares of Consolidated common stock, subject to proration so that 80 percent of the North Pittsburgh shares will be exchanged for cash and 20 percent for stock. The share exchange ratio is fixed and is not subject to any collars.
Consolidated intends to finance the cash portion of the purchase price with debt and cash on hand. Consolidated has obtained a commitment for the financing necessary to complete the transaction from Wachovia Bank, N.A. Wachovia Securities is also Consolidated's financial advisor on this transaction and has rendered a fairness opinion in connection with the transaction to the Board of Directors of Consolidated.
On a pro forma basis, for the twelve months ending March 31, 2007, the combined company would have had revenues of approximately $425.5 million, 293,400 ILEC access lines, 66,300 CLEC access line equivalents, 72,200 DSL subscribers and 1,400 employees.
"The North Pittsburgh team has established a strong reputation with its customers and in the communities it serves," said Bob Currey, Consolidated's president and chief executive officer. "North Pittsburgh delivers an attractive market, a strong network, and a history of success, providing a solid foundation on which we can build. Consolidated has a proven track record of combining telecommunications properties and achieving efficiencies for the combined company. We believe North Pittsburgh will be an excellent complement to our Illinois and Texas operations."
"For the past 101 years, we have focused on building a high quality integrated telecommunications business in Western Pennsylvania," said Harry Brown, president and chief executive officer. "Consolidated is a leader in delivering innovative products, such as IPTV, to its markets and we believe this merger provides an exciting opportunity to expand upon our existing offerings. In addition, we are confident Consolidated's customer focus will benefit both our customers and shareholders."
The acquisition is not subject to a financing condition and is expected to close either in the fourth quarter of 2007 or first quarter of 2008, subject to certain customary conditions, including approvals from federal and state regulators and North Pittsburgh's shareholders. North Pittsburgh will pay its regular July dividend and expects to pay its regular dividend in October, but has agreed not to pay further dividends. North Pittsburgh expects to call a shareholders meeting for Fall 2007, at which this transaction will be submitted to North Pittsburgh's shareholders for approval and the company will hold its 2007 annual meeting for the election of directors and other matters. Approval by Consolidated's shareholders is not required.
Strategic Rationale
With the acquisition of North Pittsburgh, Consolidated adds growing, affluent markets that are supported by an advanced network. The network can be leveraged to increase the penetration of broadband products and, with limited capital investment, to rollout video service. Approximately 99 percent of North Pittsburgh access lines are currently DSL capable and Consolidated expects to launch its video product in the Western Pennsylvania markets in 2008. Upon close of the transaction, Consolidated expects to realize both annual operating and capital synergies. Operating synergies are estimated at approximately $7.0 million in 2008 and approximately $11.0 million in 2009 and beyond. Capital synergies are estimated at approximately $3.0 million in 2008 and $6.0 million in 2009 and beyond. In addition, Consolidated estimates the transaction will be accretive to cash flow by approximately 6.0 percent (which Consolidated tracks as cash available to pay dividends), after synergies, in the first full year of operations.
North Pittsburgh Operating Statistics at March 31, 2007
o ILEC lines were 61,500.
o CLEC access line equivalents were 66,300.
o DSL subscribers were 16,300.
Other Information
Evercore Group L.L.C. is North Pittsburgh's financial advisor and rendered a fairness opinion to North Pittsburgh. Hughes Hubbard & Reed LLP and Thomas, Thomas, Armstrong & Niesen acted as legal counsel to North Pittsburgh. Schiff Hardin LLP acted as legal counsel to Consolidated.
About Consolidated Communications Holdings, Inc.
For more information please visit http://ir.consolidated.com/.
About North Pittsburgh Systems, Inc.
For more information please visit http://northpittsburgh.com/relations.asp.
Source: Consolidated Communications Holdings, Inc.
CONTACT: Allen Kimble, Senior Vice President of North Pittsburgh Systems, Inc., +1-724-443-9583
Web site: www.consolidated.com/
http://northpittsburgh.com/relations.asp
