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An Illinois-based communications company announced today that it has entered into an agreement to purchase FairPoint Communications Inc.

Consolidated Communications Holdings Inc. will buy FairPoint for $1.5 billion. The merger is to be completed in 2017.

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Consolidated Communications, based in Mattoon, Illinois, has communications networks in 11 states including Pennsylvania, Texas, California, Kansas, Iowa, Minnesota, Wisconsin, North Dakota and South Dakota. Consolidated uses a fiber optic network and data centers to sell access to Internet, voice, video, managed services cloud computing and wireless backhaul.

FairPoint is based in North Carolina and currently provides phone service in 17 states to 1.6 million customers and Internet to 230,000 customers. Most of the company’s customers and workforce are in Maine, New Hampshire and Vermont.

FairPoint is publicly traded on NASDAQ as FRP with a market capitalization of $446 million.

The company has seen substantial losses in dedicated phone line customers in Vermont since 2007, largely as a result of changes in consumer behavior (more people are using cellphones). In December 2015, FairPoint reported 84,459 residential lines and 51,574 telephone business lines, down from 202,031 residential lines and 93,388 business lines in 2007.

After the company went through bankruptcy in 2009, FairPoint made a $1 billion investment in miles of fiber, according to state officials. That fiber backbone is used by cellphone companies and businesses that need high quality broadband.

The merger acquisition combines the portfolios of both companies, bringing the total number of states served to 24. Officials with the company say the Consolidated Communications purchase will save $55 million through “estimated operating synergies.”

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After the merger, Consolidated will be the 9th largest carrier in the United States.

The agreement was unanimously approved by the boards of directors at both companies.

“This transaction combines two companies with extensive fiber networks and complementary strategies focusing on being the leading business and broadband solutions provider,” said Bob Udell, president and chief executive officer of Consolidated Communications. “This merger positions Consolidated to leverage its extensive product and services portfolio and consultative sales approach across 24 states bringing advanced solutions and a better experience to customers. We are well positioned to ensure a smooth transition for customers and employees as we leverage a solid track record of successful integrations.”

The dividend payout ratio will go up as a result of the “all-stock merger transfer” and improve the balance sheet through “deleveraging.”

“I am very proud of my team and our employees and all that we have accomplished in the last several years,” said Paul Sunu, chief executive officer of FairPoint. “This transaction offers a number of benefits for FairPoint’s shareholders including the enhanced scale of the combined company, the opportunity to benefit from the realization of synergies and the receipt of an attractive dividend going forward. I am confident the new combined company will accelerate our progress and bring numerous benefits to our customers, employees and shareholders. Together, FairPoint and Consolidated Communications create a highly competitive business and broadband company with a superior network to deliver a best-in-class experience to carrier, commercial and consumer customers.”

FairPoint shareholders will receive a 17.3 percent premium for stock. After the deal goes through, FairPoint shareholders will own 28.7 percent of the company; Consolidated shareholders will own 71.3 percent.

In the 12 months ending Sept. 30, 2016, the two companies generated more than $1.5 billion in combined revenue and $566 million in adjusted profits.

As of Sept. 30, FairPoint had a net debt of about $887 million. After the purchase, the combined debt of the two companies will be about $2.3 billion.

FairPoint operates a network of 21,000 fiber route miles; 17,000 miles of that network is located in New England.

Udell, who runs Consolidated, will serve as the president and CEO of the combined company and one member of the FairPoint board will join the Consolidated Communications board of directors.

The deal must be approved by shareholders and the Vermont Public Service Board.

Jim Porter, director of telecommunications for the Vermont Department of Public Service, says the FairPoint sale will get a thorough vetting by the board. State regulators will review the new company’s commitment to quality of service, the number of workers employed to maintain the phone and fiber network systems and other criteria.

Porter expects the companies to file a petition for review soon. The state’s pending service quality and 911 outage investigations will continue under new ownership, he said.

Last month, FairPoint announced company-wide layoffs. In New England, 110 employees were handed pink slips; 20 jobs were eliminated in Vermont. FairPoint employs 2,600 workers, according to its website.

Representatives for the unions say that they have confirmed that the layoffs will proceed as planned. About 1,550 workers at FairPoint are members of a union.

Leaders from the Communications Workers of America and the local International Brotherhood of Electrical Workers are cautiously optimistic about the sale of the company to Consolidated Communications, but they say the want to be “deeply involved” in the process as the transaction moves forward.

The two unions opposed the sale of Verizon to FairPoint in 2007. Two years later, the company declared bankruptcy. In 2014, workers went on strike for four months after the company hired contractors and announced cuts in pay and benefits to full time employees.

Don Trementozzi, president of Communications Workers of America (CWA) Local 1400, said workers and customers “have been through the wringer with FairPoint over the last eight years.”

“Our primary concern is that this transaction result in a more stable company that puts a priority on strengthening communities, not enriching Wall Street hedge fund owners,” Trementozzi said.

Mike Spillane, the business manager for the IBEW Local 2326 in Vermont, said workers will cooperate with Consolidated if the deal goes through.

“As long as Consolidated is ready to engage with our members and our customers with respect and fairness, we welcome this opportunity to help re-build the company and make it the success it has been in the past,” Spillane said.

Editor’s note: This story was updated at 5:55 a.m. Dec. 6.

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