U.S. telephone and Internet service provider
CenturyTel Inc. is acquiring Embarq Corp. for $11.6 billion, including $5.8 billion in debt. The deal comes as more customers continue to ditch landlines for cell phones. The stock portion of the deal -- 1.37 CenturyTel shares for each share of Embarq common stock -- represents a 36% premium to Embarq's Friday close. Embarq, which is larger than CenturyTel, is the local telecom division that spun off from Sprint Nextel Corp. in 2006. CenturyTel will own 34% of the combined company.
Overland Park, Kan.-based Embarq, which hired J.P. Morgan Chase & Co. as an adviser, was on the block earlier this year. DealBook noted that while troubled markets made it difficult to price the deal,
CenturyTel and Embarq may have felt more pressure to combine as people are not only dropping landlines, but as more cable companies offer their own Internet access services and industry analysts believe that bigger is better.
The two firms have complementary assets and geographic coverage. The
deal is expected to generate synergies of about $400 million annually
within the first three years of operation. The firms said key drivers
of these synergies include reduction of corporate overhead, elimination
of duplicate functions and enhanced revenue opportunities. The two companies have a combined operating presence in 33 states with about 8 million access lines, 2 million broadband customers and about 400,000 video subscribers.
The transaction is expected to close in the second quarter of 2009. -
Baz HiralalSee the CenturyTel-Embarq press release
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