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Mergers & acquisitions

Broadwing's Got a New Boss

The Corvis-Broadwing deal is done, and Broadwing has a new, albeit temporary, CEO in former UUNet chief Mark Spagnolo.

Technically, the buyer is C III Communications LLC, a joint venture between majority shareholder Corvis Corp. (Nasdaq: CORV) and management firm Cequel III. Corvis was set to hold 96 percent of the partnership, according to SEC filings in March. The parent company of Broadwing -- which has reverted to its original identity of Cincinnati Bell (NYSE: CBB) (see Broadwing Reverts to Cincinnati Bell) -- was a 3 percent shareholder.

The deal closed for a price of roughly $91 million, less than the anticipated $128 million (see Corvis Notes Broadwing Wiggle Room); Corvis officials weren't immediately available to explain why. C III is also purchasing networking capital of $17 million, with payment deferred until next year.

Spagnolo, named interim CEO, has had an up-and-down career. He's been given credit for the ascension of UUNet, where he was CEO from 1997 to 2000, but his post-bubble fortunes haven't been so rosy.

Spagnolo left UUNet shortly after the WorldCom acquisition and did a stint as head of a startup called Sitesmith. That firm got acquired by Metromedia Fiber Network Inc.(MFN) (Nasdaq: MFNX), and Spagnolo eventually became president and COO there (see MFN Saved at the Bell).

MFN never managed a profit, and Spagnolo left in an April 2002 shakeup shortly before the company declared bankruptcy (see MFN Falls Into Chapter 11 and MFN Defaults, Switches CEO). Later that year, he took the interim CEO post at another struggling outfit, FLAG Telecom Group Ltd. (OTC: FLHLQ) (see FLAG Emerges From Chap. 11), where he was already on the board of directors. He stepped down in March when FLAG named Patrick Gallagher as CEO.

Meanwhile, Cincinnati Bell (NYSE: CCB) gets $108.7 million from C III as it reverts to its prior identity as a conventional phone carrier, probably to sighs of relief from its executives. "It seems funny -- POTS has become the attractive, glamorous side," says Lynda Starr, analyst with Probe Research Inc.. "But that was always the side that was making the money."

— Craig Matsumoto, Senior Editor, Light Reading
BobbyMax 12/4/2012 | 11:54:49 PM
re: Broadwing's Got a New Boss Cincinnati Bell used to be a profitable little company. But some corrupt investors decided to change and pklay other games to make money at the expese of customers. To me this represents a web of corruption. No doubt the Telecom industry is experiecing the worst downturn in the history with no likelihood of recovery.
Jet 12/4/2012 | 11:54:48 PM
re: Broadwing's Got a New Boss Broadwing was bought cheaply and comes with a huge customer base and will provide the ongoing showcase for Corvis and their all optical network technology.

Now I see the prior poster indicates "no prospects for recovery" for this sector, well generally that is precisely when you load up on these kinds of stocks. Even depressions don't last forever.

Very odd that the same people that were jumping all over tech companies that were priced to perfection in yr 2000 - are now sitting on the sidelines precisely when companies like Corvis represent the most compelling bargains at a price 1/100th of their all time highs
grapsfan 12/4/2012 | 11:54:23 PM
re: Broadwing's Got a New Boss On the one hand, they've changed the name back to Cincinnati Bell, to imply that the company is reverting back to their conservative, money-making, Bell history.

On the other hand, they're going to load up with Corvis gear that isn't as battle-tested as traditional telephony equipment is (like ESS, simple ADMs & DCS, loop carrier NEs, etc.). And they've turned the reins over to a guy who ran an Internet company (granted, one of the largest Internet companies). He also ran a company that pushed leading-edge fiber technology systems, again, stuff that has never been in the telephony mainstream? Does this guy even have a telephony background?

The irony here is that he ran one of the divisions of WorldCom that made WorldCom a much different company than its MCI roots. Now that they've changed back to MCI, he re-emerges with a company looking to make the exact same image change. The more things change...the more people who led the industry into the swan dive stay in charge.
ksig25 12/4/2012 | 11:54:10 PM
re: Broadwing's Got a New Boss BobbyMax, I won't even bother with your dumb a*s....for everyone else, Broadwing's parent company reverted back to Cincinnati Bell, not the braodband portion that Corvis and CIII bought. They purchased Broadwing, and that name is still the same.

ksig25
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