Consolidated to be acquired by Searchlight, BCI for $3.1B

Consolidated Communications on Monday announced an agreement to be acquired by Searchlight Capital and British Columbia Investment (BCI). Including debt, the all-cash deal will value Consolidated at $3.1 billion, with investors receiving $4.70 per share for all shares not already owned by Searchlight.

Prior to its plan to acquire the company, Searchlight owned 34.3% of Consolidated, and has been the company's largest stakeholder.

The agreement comes roughly six months after Consolidated first disclosed the bid by Searchlight and BCI. The original offer was for $4 per share, which some investors saw as too low. Since then, Consolidated has stayed quiet on the matter, pointing instead to the special committee reviewing the bid. In today's announcement, Consolidated confirmed that the special committee – composed of "independent and disinterested directors of the Board" – had "unanimously approved" the deal, which was then approved by the Board of Directors.

In statements, both Consolidated CEO Bob Udell and Board Chairman Robert J. Currey, also the chair of the special committee, touted the deal for providing a "significant" and "substantial" value to shareholders. Both execs also noted that the acquisition appeared the best path forward for the company, as compared to alternatives.

Related:Searchlight and BCI bid to take Consolidated private

"The Special Committee thoroughly reviewed their proposal, considering the benefits of the transaction against other strategic alternatives available to the Company, including continuing as a publicly-traded company. We also considered capital structure alternatives, analyzing the potential availability, cost and feasibility of injecting additional capital into the business. Following this review, the Special Committee determined this transaction is the best path forward for Consolidated Communications and its shareholders," said Currey.

"We have been operating in a shifting economic environment over the course of this past year, resulting in higher operating costs and a challenging market for attractive financing options," added Udell, the company's CEO. 

Indeed, Consolidated had announced during its Q2 earnings call in August that it would further delay its fiber build completion date beyond 2026. The company – which is in the midst of a multi-year plan to upgrade 70% of its footprint to fiber – has pushed its build timelines more than once, after originally planning to complete its upgrade by 2025.

As of Consolidated's Q2 earnings call, the company was still planning to reach "approximately 50%" of its addressable market with fiber by end of year, and projected a return to revenue growth in 2024.

Related:Minority shareholder wants Consolidated to reject Searchlight, BCI bid

According to Udell's statement on Monday's takeover news, going private in partnership with Searchlight will give Consolidated "increased flexibility" as it pursues that fiber build and growth.

Deal to close by 2025

According to the companies, the acquisition deal awaits regulatory approvals and is expected to close by Q1 2025. Consolidated said it will still release earnings for Q3 2023 on November 7, but "will not host an earnings conference call."

Consolidated's stock climbed 18% to $4.18 on Monday, following the acquisition news. According to Marketwatch, Consolidated's stock has been up nearly 17% this year in response to the initial bid by Searchlight and BCI.
The companies confirmed the purchase price of $4.70 a share is "a 70% premium" to Consolidated's closing price when the bid was initially disclosed to the SEC on April 12.