CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. (NASDAQ:CNSL) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement.
On December 3, 2016, Consolidated Communications Holdings, Inc.
(the Company), Falcon Merger Sub, Inc., a newly formed Delaware
corporation and a wholly-owned subsidiary of the Company (Merger
Sub), and FairPoint Communications, Inc., a Delaware corporation
(FairPoint), entered into an Agreement and Plan of Merger (the
Merger Agreement). The Merger Agreement provides for, among other
things, a business combination whereby Merger Sub will merge with
and into FairPoint, with FairPoint as the surviving entity (the
Merger). As a result of the Merger, the separate corporate
existence of Merger Sub will cease, and FairPoint will continue
as the surviving corporation and a wholly-owned subsidiary of the
Company.
At the effective time of the Merger, each share of common stock,
par value $0.01 per share, of FairPoint issued and outstanding
immediately prior to the effective time of the Merger (other than
(i) shares held in treasury or owned directly by the Company, any
Subsidiary of the Company, Merger Sub or Parent (other than
shares in trust accounts, managed accounts and the like or shares
held in satisfaction of a debt previously contracted), and (ii)
shares held by stockholders who have properly made and not
withdrawn a demand for appraisal rights under Delaware law) will
be converted into and become the right to receive 0.7300 shares
of common stock, par value $0.01 per share, of the Company and
cash in lieu of fractional shares, less any applicable taxes
required to be withheld, all as set forth in the Merger
Agreement.
The Merger is subject to various customary closing conditions,
including, but not limited to, (i) approval by the Companys
stockholders and FairPoints stockholders, (ii) the expiration or
termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
(iii) federal and state regulatory approvals, (iv) the absence of
any order, injunction, statute, rule, regulation or decree
prohibiting, precluding, restraining, enjoining or making illegal
the consummation of the Merger, (v) the accuracy of the
representations and warranties of each party, (vi) performance,
in all material respects, of all obligations and compliance with,
in all material respects, agreements and covenants to be
performed or complied with by each party, (vii) declaration of
effectiveness of the Registration Statement on Form S-4 to be
filed by the Company, (viii) FairPoint holding a minimum cash
amount as of the effective time of the merger, and (ix) the
approval of the listing of additional shares of Company common
stock to be issued to FairPoints stockholders.
The Company, Merger Sub and FairPoint have made customary
representations, warranties and covenants in the Merger
Agreement, including FairPoint agreeing not to solicit
alternative transactions or, subject to certain exceptions, to
enter into discussions concerning, or provide confidential
information in connection with, an alternative transaction. The
Merger Agreement contains certain termination rights for both the
Company and FairPoint, and further provides that, upon
termination of the Merger Agreement under certain circumstances,
FairPoint may be obligated to pay the Company a termination fee
of $18,900,000 and, upon termination of the Merger Agreement
under certain other circumstances, the Company may be obligated
to pay FairPoint a termination fee of $18,900,000.
As of the effective time, each option to purchase shares of
FairPoint common stock or other right to purchase FairPoint
common stock under any FairPoint stock plan (each, a Company
Option), to the extent outstanding and unexercised immediately
prior thereto, shall become fully vested and shall, subject to
certain conditions set forth in the Merger Agreement, without any
action on the part of any holder thereof, be automatically
canceled in exchange for the right to receive, as soon as
reasonably practicable following the effective time, that number
of shares of Company common stock as is equal to the option
consideration (as defined in the Merger Agreement).
As of the effective time, each performance award granted under
any FairPoint stock plan (each, a Performance Award), to the
extent outstanding immediately prior thereto, shall become fully
vested (at the 100% level) and shall, without any action on the
part of any holder thereof, be automatically canceled in exchange
for the right to receive, as soon as reasonably practicable
following the effective time, the number of shares of Company
common stock equal to the performance award consideration (as
defined in the Merger Agreement).
As of the effective time, each restricted share award granted
under any FairPoint stock plan, to the extent outstanding and
subject to vesting or forfeiture conditions (whether time-based
or performance-based), shall become fully vested or released from
such forfeiture conditions as of the effective time and shall be
treated as a share of FairPoint common stock for all purposes of
the Merger Agreement.
In connection with the execution of the Merger Agreement,
Consolidated Communications, Inc., a wholly-owned subsidiary of
the Company (CCI), entered into a Commitment Letter, dated
December 3, 2016 (the Commitment Letter), from (i) Morgan Stanley
Senior Funding, Inc., (ii) The Bank of Tokyo-Mitsubishi UFJ,
Ltd., MUFG Union Bank, N.A., MUFG Securities Americas Inc.
(collectively, MUFG) and/or any other affiliates or subsidiaries
as MUFG collectively deems appropriate to provide the services
referred to therein, (iii) TD Securities (USA) LLC, (iv) The
Toronto-Dominion Bank, New York Branch, and (v) Mizuho Bank, Ltd.
(collectively, the Lead Arrangers). The Commitment Letter
provides for a senior secured incremental term loan facility in
an aggregate principal amount that will yield up to $865,000,000
in gross proceeds to CCI (the Incremental Term Loan Facility) and
senior unsecured term loan facility in an aggregate principal
amount that will yield up to $70,000,000 in gross proceeds to CCI
(the Unsecured Term Loan Facility, together with the Incremental
Term Loan Facility, collectively, the Term Loan Facilities). The
Term Loan Facilities can be used to finance, in part, and pay the
fees and expenses in connection with, the transactions
contemplated by the Merger Agreement and to repay existing
indebtedness of FairPoint, with any remaining portion expected to
be financed with cash on-hand or other sources of liquidity in an
amount to be determined.
to the terms of the Commitment Letter, the definitive agreement
to be entered into with respect to the Incremental Term Loan
Facility will contain (a) representations and warranties
applicable to CCI and its subsidiaries that are the same as the
representations and warranties in the Third Amended and Restated
Credit Agreement, dated as of October 5, 2016, among the Company,
CCI, the lenders party thereto, Wells Fargo Bank, National
Association, as Administrative Agent and other agents party
thereto (the Credit Agreement), and (b) covenants that are the
same as those contained in the Credit Agreement. The Incremental
Term Loan Facility will mature on the date that is seven years
after the effective date of the Merger, provided that unless CCIs
6.50% Senior Notes due 2022 (the Senior Notes) are repaid in full
or redeemed in full, in each case, in a manner permitted under
the Credit Agreement and the Incremental Facility Amendment (as
defined in the Credit Agreement) to which the Incremental Term
Loan Facility is effected (and, if repaid or redeemed with
proceeds of indebtedness such indebtedness shall have a maturity
date on or after March 31, 2024) on or prior to March 31, 2022,
such maturity date of the Term Loan Facility shall be March 31,
2022. The Incremental Term Loan Facility will be secured on a
pari passu basis with the existing credit facilities
under the Credit Agreement.
The definitive financing documentation for the Unsecured Term
Loan Facility shall contain the terms set forth in the Commitment
Letter, subject to the right of the Lead Arrangers to exercise
certain market flex provisions as agreed by CCI and the Lead
Arrangers and, to the extent any other terms are not expressly
set forth in the Commitment Letter, will (i) be negotiated in
good faith within a reasonable time period to be determined based
on the expected effective date of the Merger taking into account
the timing of the syndication of the Unsecured Term Loan Facility
and the pre-closing requirements of the Merger and (ii) contain
such other terms as CCI and the Lead Arrangers shall reasonably
agree, it being understood and agreed that the Unsecured Term
Loan Financing Documentation shall be substantially similar to
the Credit Agreement, provided that such terms shall be, among
other things, subject to (i) modifications to take into account
the unsecured nature of the Unsecured Term Loan Facility, (ii)
modifications to reflect changes in law or accounting standards
since the date of the Credit Agreement and (iii) modifications to
reflect operational, agency and administrative requirements of
the administrative agent under the Credit Agreement. The
Unsecured Term Loan Facility will mature on the date that is
seven years and six months after the effective date of the
Merger. The Unsecured Term Loan Facility will be guaranteed on a
senior basis by each entity that guarantees the indebtedness the
Credit Agreement, including FairPoint and its subsidiaries.
The commitments under the Unsecured Term Loan Facility shall be
automatically and permanently reduced to zero and cancelled if,
within 90 days following the date of the Commitment Letter, CCI
obtains an amendment, reasonably satisfactory to the Lead
Arrangers, to the terms of the Credit Agreement (and such
amendment goes effective within such period) (the Amendment)
allowing for an additional aggregate amount of at least
$70,000,000 to be incurred as a senior secured incremental term
loan credit facility to Section 2.21 of the Credit Agreement
andthe commitments to provide the Incremental Term Loan Facility
shall be automatically and permanently increased, on a pro rata
basis, by an amount equal to $70,000,000 upon effectiveness of
the Amendment. The Company expects to promptly seek the
Amendment.
The closing of the Term Loan Facilities will be subject to the
satisfaction of certain conditions, the negotiation and execution
and delivery of definitive loan documentation for the Term Loan
Facilities, all as more fully set forth in the Commitment Letter.
The foregoing descriptions of the Merger Agreement and the
Commitment Letter do not purport to be complete and are qualified
in their entirety by reference to the full text of the Merger
Agreement and the Commitment Letter, respectively, copies of
which will be submitted in a future filing.
Item 7.01. Regulation FD Disclosure.
On December 5, 2016, the Company and FairPoint issued a joint
press release announcing that they had entered into the Merger
Agreement. A copy of the press release is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
In addition, on December 5, 2016, the Company intends to provide
supplemental information regarding the proposed transaction to
investors and analysts, a copy of the written materials for which
is attached hereto as Exhibit 99.2 and incorporated herein by
reference.
Safe Harbor
The Securities and Exchange Commission (SEC) encourages companies
to disclose forward-looking information so that investors can
better understand a companys future prospects and make informed
investment decisions. Certain statements in this filing are
forward-looking statements and are made to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements reflect, among other things, current
expectations, plans, strategies, and anticipated financial
results of the Company and FairPoint, both separately and as a
combined entity. There are a number of risks, uncertainties, and
conditions that may cause the actual results of the Company and
FairPoint, both separately and as a combined entity, to differ
materially from those expressed or implied by these
forward-looking statements. These risks and uncertainties include
the timing and ability to complete the proposed acquisition of
FairPoint by the Company, the expected benefits of the
integration of the two companies and successful integration of
FairPoints operations with those of the Company and realization
of the synergies from the integration, as well as a number of
factors related to the respective businesses of the Company and
FairPoint, including economic and financial market conditions
generally and economic conditions in the Companys and FairPoints
service areas; various risks to stockholders of not receiving
dividends and risks to the Companys ability to pursue growth
opportunities if the Company continues to pay dividends according
to the current dividend policy; various risks to the price and
volatility of the Companys common stock; changes in the valuation
of pension plan assets; the substantial amount of debt and the
Companys ability to repay or refinance it or incur additional
debt in the future; the Companys need for a significant amount of
cash to service and repay the debt and to pay dividends on the
common stock; restrictions contained in the debt agreements that
limit the discretion of management in operating the business;
legal or regulatory proceedings or other matters that impact the
timing or ability to complete the acquisition as contemplated,
regulatory changes, including changes to subsidies, rapid
development and introduction of new technologies and intense
competition in the telecommunications industry; risks associated
with the Companys possible pursuit of acquisitions; system
failures; losses of large customers or government contracts;
risks associated with the rights-of-way for the network;
disruptions in the relationship with third party vendors; losses
of key management personnel and the inability to attract and
retain highly qualified management and personnel in the future;
changes in the extensive governmental legislation and regulations
governing telecommunications providers and the provision of
telecommunications services; telecommunications carriers
disputing and/or avoiding their obligations to pay network access
charges for use of the Companys and FairPoints network; high
costs of regulatory compliance; the competitive impact of
legislation and regulatory changes in the telecommunications
industry; liability and compliance costs regarding environmental
regulations; the possibility of disruption from the integration
of the two companies making it more difficult to maintain
business and operational relationships; the possibility that the
acquisition is not consummated, including, but not limited to,
due to the failure to satisfy the closing conditions; the
possibility that the merger may be more expensive to complete
than anticipated, including as a result of unexpected factors or
events; and diversion of managements attention from ongoing
business operations and opportunities. A detailed discussion of
risks and uncertainties that could cause actual results and
events to differ materially from such forward-looking statements
are discussed in more detail in the Companys and FairPoints
respective filings with the SEC, including the Annual Report on
Form 10-K of the Company for the year ended December 31, 2015,
which was filed with the SEC on February 29, 2016, under the
heading Item 1ARisk Factors, and the Annual Report on Form 10-K
of FairPoint for the year ended December 31, 2015, which was
filed with the SEC on March 2, 2016, under the heading Item
1ARisk Factors, and in subsequent reports on Forms 10-Q and 8-K
and other filings made with the SEC by each of the Company and
FairPoint. Many of these circumstances are beyond the ability of
the Company and FairPoint to control or predict. Moreover,
forward-looking statements necessarily involve assumptions on the
part of the Company and FairPoint . These forward-looking
statements generally are identified by the words believe, expect,
anticipate, estimate, project, intend, plan, should, may, will,
would, will be, will continue or similar expressions. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements of the Company and FairPoint, and
their respective subsidiaries, both separately and as a combined
entity to be different from those expressed or implied in the
forward-looking statements. All forward-looking statements
attributable to us or persons acting on the respective behalf of
the Company or FairPoint are expressly qualified in their
entirety by the cautionary statements that appear throughout this
filing. Furthermore, forward-looking statements speak only as of
the date they are made. Except as required under the federal
securities laws or the rules and regulations of the SEC, each of
the Company and FairPoint disclaim any intention or obligation to
update or revise publicly any forward-looking statements. You
should not place undue reliance on forward-looking statements.
Important Merger Information and Additional Information
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation
of any vote or approval. In connection with the proposed
transaction, the Company and FairPoint will file relevant
materials with the SEC. The Company will file a Registration
Statement on Form S-4 that includes a joint proxy statement of
the Company and FairPoint and which also constitutes a prospectus
of the Company. The Company and FairPoint will mail the final
joint proxy statement/prospectus to their respective
stockholders. Investors are urged to read the joint proxy
statement/prospectus regarding the proposed transaction when it
becomes available, because it will contain important
information. The joint proxy statement/prospectus and
other relevant documents that have been or will be filed by the
Company and FairPoint with the SEC are or will be available free
of charge at the SECs website, www.sec.gov, or by directing a
request when such a filing is made to Consolidated Communications
Holdings, Inc., 121 South 17th Street, Mattoon, IL 61938,
Attention: Investor Relations or to FairPoint Communications,
Inc., 521 East Morehead Street, Suite 500, Charlotte, North
Carolina 28202, Attention: Secretary.
The Company, FairPoint and certain of their respective directors,
executive officers and other members of management and employees
may be considered participants in the solicitation of proxies in
connection with the proposed transaction. Information
about the directors and executive officers of the Company is set
forth in its definitive proxy statement, which was filed with the
SEC on March 28, 2016. Information about the directors and
executive officers of FairPoint is set forth in its definitive
proxy statement, which was filed with the SEC on March 25,
2016. These documents can be obtained free of charge
from the sources listed above. Investors may obtain additional
information regarding the interests of such participants by
reading the joint proxy statement/prospectus the Company and
FairPoint will file with the SEC when it becomes available.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| No. | Description | |||
| 99.1 | Press release dated December 5, 2016 | |||
| 99.2 | Investor/Analyst Presentation Materials | |||
About CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. (NASDAQ:CNSL)
Consolidated Communications Holdings, Inc. is a holding company with operating subsidiaries that provide integrated communications services in consumer, commercial and carrier channels in California, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, Pennsylvania, South Dakota, Texas and Wisconsin. The Company operates as both an Incumbent Local Exchange Carrier (ILEC) and a Competitive Local Exchange Carrier (CLEC) dependent upon the territory served. The Company provides a range of services and products that include local and long-distance service, broadband Internet access, video services, Voice over Internet Protocol (VoIP), private line services, carrier grade access services, network capacity services over its regional fiber optic networks, cloud data services, data center and managed services, directory publishing, equipment sales and cloud data services. The Company markets services to its residential customers either individually or as a bundled package. CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. (NASDAQ:CNSL) Recent Trading Information
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. (NASDAQ:CNSL) closed its last trading session up +0.11 at 28.38 with 163,566 shares trading hands.