-- Improves company's financial position with free cash flow accretive
transaction that lowers dividend payout ratio while maintaining solid
balance sheet
-- Provides approximately $35 million in annual expense and capital savings
-- Includes tax assets with an estimated net present value of approximately
$130 million
-- Grows rural footprint with expansion into Iowa and Minnesota and adds
approximately 256,000 access lines, about 95,000 high-speed Internet
customers and about 26,000 digital TV customers
-- Iowa Telecom Chairman and CEO Alan Wells to join Windstream board of
directors
LITTLE ROCK, Ark.--(BUSINESS WIRE)--
Windstream Corporation (NYSE: WIN) announced today that it has entered
into a definitive agreement to acquire Iowa Telecommunications Services,
Inc. (NYSE: IWA), based in Newton, Iowa, in a transaction valued at
approximately $1.1 billion.
Iowa Telecom shareholders will receive 0.804 shares of Windstream stock
and $7.90 in cash per each Iowa Telecom share under terms of the
agreement approved by the boards of directors of both companies.
Windstream expects to issue approximately 26.5 million shares of stock
valued at approximately $269 million, based on the company's closing
stock price on Nov. 23, 2009, and pay approximately $261 million in cash
as part of the transaction. Windstream also will repay estimated net
debt of approximately $598 million. Windstream intends to finance the
cash portion of the transaction and the repayment of Iowa Telecom's
outstanding indebtedness with the proceeds from a debt financing or
additional bank borrowings.
"These are well-run, profitable properties in very rural service areas
that expand our presence in the Upper Midwest and grow our free cash
flow per share," said Jeff Gardner, president and CEO of Windstream. "I
also am pleased to have Alan join our company's board of directors. His
financial acumen and executive management experience will be a
tremendous asset."
"This is an excellent transaction for our shareholders, and for the
customers that we serve," said Alan L. Wells, Iowa Telecom Chairman and
CEO. "Windstream is a leader in our industry, and Jeff Gardner and his
team have done an outstanding job of profitably growing their business
in challenging times. Windstream shares our commitment to both customer
service and shareholder value, and we're very pleased that our company
will be joining the Windstream organization."
Windstream estimates the transaction will be accretive to free cash flow
in the first year following the closing after expected annual synergies
of approximately $35 million in operating expenses and capital
expenditure savings and excluding integration charges. The transaction
also includes tax assets with an estimated net present value of
approximately $130 million.
The transaction is expected to close in mid-2010, subject to certain
conditions, including necessary approvals from federal and state
regulators and Iowa Telecom shareholders.
Iowa Telecom provides communications services to residential and
business customers in Iowa and Minnesota. The company has approximately
256,000 access lines, about 95,000 high-speed Internet customers and
about 26,000 digital TV customers. The company has approximately 11
access lines per square mile across its service areas and operates an
extensive fiber and IP network.
The transaction also includes Iowa Telecom's 15 FCC Advanced Wireless
Service licenses and three 700 MHz Band licenses.
Iowa Telecom has approximately 800 employees, including about 350 at its
corporate headquarters in Newton. Windstream will maintain an operating
presence in the headquarters building and plans to expand the existing
call center.
On a pro forma basis for the acquisition of Sherburne Tele Systems, Inc.
in the twelve months ended Sept. 30, 2009, Iowa Telecom generated
approximately $275 million in revenue; $130 million in operating income
before depreciation and amortization (OIBDA), which excludes merger and
integration costs; and $69 million in free cash flow, which is defined
as net cash from operations less capital expenditures.
On a pro forma basis following completion of the company's pending
transactions with Lexcom, NuVox and Iowa Telecom, as well as the
recently completed acquisition of D&E Communications, Windstream will
have approximately $4 billion in revenue and about $2 billion in OIBDA,
excluding non-cash pension and merger and integration expenses.
"Windstream has extensive experience with successfully integrating new
properties. The transactions we have announced this year are scheduled
to close in an orderly fashion over a period of time providing the
opportunity for very manageable integrations," Gardner said. "Each of
these companies is extremely well run, and we are very far along in our
integration planning."
Additional Information
Stephens Inc., Goldman, Sachs & Co. and BofA Merrill Lynch are acting as
financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP as legal
adviser to Windstream on the transaction. J.P. Morgan Securities Inc.
and Fredrikson & Byron, P.A. are acting as financial advisers and legal
advisers to Iowa Telecom.
Non-GAAP Financial Measures
This press release references the non-GAAP financial measure OIBDA for
the twelve months ended Sept. 30, 2009 on a pro forma basis. A
reconciliation of this measure to the most directly comparable GAAP
measure is presented below:
Operating income under GAAP: $60 million
Merger and integration costs: $ 2 million
Sherburne Tele Systems pro forma adjustment: $ 8 million
Depreciation and amortization: + $60 million
OIBDA: $130 million
This press release also references the non-GAAP financial measure free
cash flow for the twelve months ended Sept. 30, 2009 on a pro forma
basis. A reconciliation of this measure to the most directly comparable
GAAP measure is presented below:
Cash flows from Operations under GAAP: $86 million
Capital expenditures: ($24) million
Merger and integration costs: $ 2 million
Sherburne Tele Systems pro forma adjustment: +$ 5 million
Free cash flow: $69 million
Cautionary Statement Regarding Forward-Looking Statements
Windstream claims the protection of the safe-harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995. Forward-looking statements, including statements regarding the
completion of the acquisition and expected benefits of the acquisition,
are subject to uncertainties that could cause actual future events and
results to differ materially from those expressed in the forward-looking
statements. These forward-looking statements are based on estimates,
projections, beliefs and assumptions that Windstream believes are
reasonable but are not guarantees of future events and results. Actual
future events and results of Windstream may differ materially from those
expressed in these forward-looking statements as a result of a number of
important factors. Factors that could cause actual results to differ
materially from those contemplated above include, among others: receipt
of required approvals of regulatory agencies; the possibility that the
anticipated benefits from the acquisition cannot be fully realized or
may take longer to realize than expected; the possibility that costs or
difficulties related to the integration of Iowa Telecom operations into
Windstream will be greater than expected; the ability of the combined
company to retain and hire key personnel; and those additional factors
under the caption "Risk Factors" in Windstream's Form 10-K for the year
ended Dec. 31, 2008 and in subsequent Securities and Exchange Commission
filings. In addition to these factors, actual future performance,
outcomes and results may differ materially because of more general
factors including, among others, general industry and market conditions
and growth rates, economic conditions, and governmental and public
policy changes. Windstream undertakes no obligation to update or revise
any forward-looking statements, whether as a result of new information,
future events or otherwise. The foregoing review of factors that could
cause Windstream's actual results to differ materially from those
contemplated in the forward-looking statements should be considered in
connection with information regarding risks and uncertainties that may
affect Windstream's future results included in Windstream's filings with
the Securities and Exchange Commission at www.sec.gov.
Additional Information and Where to Find It
This press release may be deemed to be solicitation material in respect
of the proposed merger of Iowa Telecom and Windstream. In connection
with the proposed merger, Windstream will file a Registration Statement
on Form S-4 with the SEC that will contain a proxy statement/prospectus. Iowa
Telecom investors and security holders are advised to read the proxy
statement/prospectus and any other relevant documents filed with the SEC
when they become available because those documents will contain
important information about Iowa Telecom, Windstream and the proposed
merger. The final proxy statement/prospectus will be mailed to
shareholders of Iowa Telecom. Investors and security holders may obtain
a free copy of the proxy statement/prospectus when it becomes available
at the SEC's Web site at www.sec.gov.
Free copies of the proxy statement/prospectus, when it becomes
available, may also be obtained from Windstream upon written request to
Windstream Investor Relations, 4001 Rodney Parham Road, Little Rock, AR
72212 or by calling (866) 320-7922, or from Iowa Telecom upon written
request to Iowa Telecommunications Services, Inc., 403 W. Fourth Street
North, Newton, IA 50208 or by calling 1-641-787-2089. This communication
shall not constitute an offer to sell or the solicitation of an offer to
sell or the solicitation of an offer to buy any securities, nor shall
there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No
offer of securities shall be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933, as
amended.
About Windstream
Windstream Corporation is an S&P 500 company that provides phone,
high-speed Internet and high-definition digital TV services to customers
in 16 states. The company also offers a wide range of IP-based voice and
data services and advanced phone systems and equipment to businesses and
government agencies. The company has approximately 3 million access
lines and about $3.1 billion in annual revenues. Windstream is ranked
4th in the 2009 BusinessWeek 50 ranking of the best performing U.S.
companies. For more information about Windstream, visit www.windstream.com.
About Iowa Telecom
Iowa Telecommunications Services, Inc. (d/b/a Iowa Telecom) is a
telecommunications service provider that offers local telephone, long
distance, Internet, broadband and network access services to business
and residential customers. Today, the Company and its subsidiaries serve
over 450 Iowa communities, 10 Minnesota communities and employs
approximately 800 people. The Company's headquarters are in Newton,
Iowa. The Company trades on the New York Stock Exchange under the symbol
IWA. For further information regarding Iowa Telecom, please go to www.iowatelecom.com
and select "Investor Relations." The Iowa Telecom logo is a registered
trademark of Iowa Telecommunications Services, Inc. in the United States.