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"You saw an acquisition two weeks ago, a major delivering event," CEO Bob Currey said at Barclays Capital Worldwide Wireless and Wireline Conference. Frontier is technically merging with a unit that Verizon will spin out. In exchange for the operations, Frontier will pay $5.3 billion in stock to Verizon shareholders. It will also deliver a combination of cash and debt securities that, combined with debt it is assuming, will total $3.3 billion. Because the value that the two sides are exchanging are viewed to have equal value, the companies believe that the Reverse Morris Trust merger will not incur a tax bill. Frontier says that its debt level will fall from 3.8 times Ebitda to 2.6 times Ebitda, because the transaction will significantly boost profitability more than it will increase its leverage. Consolidated's leverage comes to about 4.7 times Ebitda. That is a higher level than many of the company's peers in rural telecommunications. However, management also pointed out that the company does not face maturities until December 2014. Consolidated could use its free cash flow to reduce its debt, although Currey added "our dividend is sacred." The CEO of the Mattoon, Ill., company did not seem open to exchanging equity for debt, but was more open to a tax-lite deal in the mold of the Frontier-Verizon transaction. Rural telecoms by definition operate in slower growing markets and have often looked to M&A to expand their revenues. Consolidated has been involved in both ends of consolidation. McLeodUSA Inc. bought Consolidated in the 1990s, but it ultimately landed in bankruptcy protection. Management joined with Providence Equity Partners and Spectrum Equity Investors to purchase Consolidated. The company has made other acquisitions and gone public. "We would lean towards being buyer," Currey said. "That's what we were put together to do back in the PE days. We do that quite well." - Chris Nolter
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In the wake of Frontier Communications Corp.'s $8.6 billion tax-free merger with a unit of Verizon Communications Inc. (NYSE:VZ), the CEO of Consolidated Communications Holdings Inc. (NASDAQ:CNSL) gave investors a view into his thinking during a Wednesday call.
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