Windstream Transforms With PAETEC Mega-Merger

Written by Craig Galbraith
August 1, 2011

Windstream will now serve business customers in 46 states and the District of Columbia, and maintain approximately 100,000 fiber route miles across the country.

A monster merger starts August off with a bang.

Windstream Corp. announced Monday that it will buy PAETEC Holding Corp. for $891 million in stock thats a 27 percent premium over PAETECs closing price. Windstream will also assume $1.4 billion of debt, raising the total value of the deal to $2.3 billion.

Calling it “another significant step in the companys transformation,” Windstream will now serve business customers in 46 states and the District of Columbia, and maintain approximately 100,000 fiber route miles across the country. Windstream will offer data center services across the U.S. and have improved capability to serve multi-location business customers.

A combined Windstream-PAETEC would have had $6.1 billion in total revenue and about $2.4 billion in adjusted operating income before depreciation and amortization, which excludes non-cash pension expense, restructuring charges and stock-based compensation expense, on a pro forma basis for the last 12 months ended March 31. Business and broadband revenues would have comprised approximately 70 percent of total revenue.

This transaction significantly advances our strategy to drive top-line revenue growth by expanding our focus on business and broadband services,” said Jeff Gardner, president and CEO of Windstream. The combined company will have a nationwide network with a deep fiber footprint to offer enhanced capabilities in strategic growth areas, including IP-based services, data centers, cloud computing and managed services. Financially, we improve our growth profile and lower the payout ratio on our strong dividend, offering investors a unique combination of growth and yield.”

PAETEC shareholders will get 0.460 shares of Windstream common stock for each PAETEC share owned under the terms of the merger agreement. Those shareholders will own about 13 percent of a combined Windstream-PAETEC.

The deal is subject to normal regulatory approval.

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for in-depth coverage of Monday’s landmark Windstream-PAETEC announcement.