RCN to Buy NEON
HERNDON, Va. -- RCN Corporation (NASDAQ: RCNI) and NEON Communications Group, Inc. (AMEX: NGI) today announced they have entered into a definitive agreement for RCN to acquire NEON for up to $5.25 per share of NGI common stock, in cash, for expected total consideration of up to approximately $260 million. The transaction has been approved by the Board of Directors of both companies, and is expected to close during the fourth quarter of 2007, subject to regulatory approvals and the approval of NEON's stockholders as well as certain other closing conditions described below.
The transaction combines RCN, a leading competitive provider of video, data, and voice services to residential and business customers in the Northeast, mid-Atlantic, and Chicago metro markets, with NEON's pure play network transport services to carrier and enterprise customers in the twelve-state New England and mid-Atlantic regions. NEON offers RCN a complementary network and a customer base that fits very well into RCN Business Solutions' growth strategy. Pro forma for the quarter ended March 31, 2007 (assuming that the transaction had closed on January 1, 2007), combined RCN Business Solutions' annualized Revenue and EBITDA would have been approximately $160 million and $40 million, respectively, nearly twice the actual results of RCN Business Solutions. These figures exclude an estimated $10 million of expected revenue and expense synergies to be achieved during the integration period following the closing of the transaction. In addition, this acquisition expands RCN's overall network footprint, including over 1,000 combined on-net commercial locations, and creating an opportunity to increase its addressable residential homes in markets both inside and adjacent to its existing core footprint.
NEON brings to RCN:
- A densely built fiber optic network with approximately 4,800 route miles, over 230,000 fiber miles, 22 colocation facilities, and more than 200 points of presence from Maine to Virginia
- A facilities-based wholesale communications provider that supplies high bandwidth fiber optic capacity and comprehensive end-to-end telecom services to approximately 120 carrier and enterprise customers
- Unique fiber routes along utility rights-of-way, expanding RCN's commitment to diversity from the legacy telecom infrastructure
- Complementary network and similar sales approach, which will help facilitate integration and open up new markets for RCN products
- Complementary customer base - NEON's carrier focus and RCN's enterprise focus together offer enhanced growth and sales opportunities