Consolidated Buys FairPoint to Expand Fiber Reach

The $1.5 billion deal will more than double the size of Consolidated's fiber-optic network to 35,000 route miles.
Matthew HellerDecember 5, 2016
Consolidated Buys FairPoint to Expand Fiber Reach

In the latest telecom industry deal, Consolidated Communications has agreed to acquire FairPoint Communications for about $1.5 billion, more than doubling the size of its fiber-optic network.

Charlotte, N.C.-based Fairpoint provides phone and Internet service in 17 states, with 17,000 of its 21,000 fiber route miles in northern New England. The acquisition will bring Consolidated’s route miles to 35,000 across 24 states and enhance its on-net building and fiber-connected towers to 8,500 and 2,400, respectively.

“This transaction combines two companies with extensive fiber networks and complementary strategies focusing on being the leading business and broadband solutions provider,” Consolidated CEO Bob Udell said Monday in a news release announcing the deal.

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“This merger positions Consolidated to leverage its extensive product and services portfolio and consultative sales approach across 24 states bringing advanced solutions and a better experience to customers,” he added.

The all-stock deal will pay shareholders of FairPoint $20.72 per share, according to Reuters, representing a premium of 21.9% to Friday close. In trading Monday, the stock was up 12.3%, at $19.10.

Consolidated’s move comes only five days after Zayo Group agreed to acquire smaller rival Electric Lightwave for $4.2 billion. There have been five telecom mergers in the past two months as growing demand for data and video services drives companies to expand their fiber optic networks.

“As a result of the expanded fiber footprint, Consolidated will be able to provide up to 32 markets with access to Ethernet connections capable of symmetrical 1 Gbps speeds,” FierceTelecom said.

FairPoint had approximately $830 million in revenue for the 12 months ended Sept. 30, 2016. After closing, Consolidated’s shareholders will own approximately 71.3% of the pro forma combined company and FairPoint’s shareholders will own 28.7%.

Hedge fund Maglan Capital, which owns a minority stake in FairPoint, had been pushing the company to consider selling itself off, initiating a share repurchase program or issuing a recurring dividend for shareholders.

“This a great result,” Maglan President David Tawil told FierceTelecom. “Consolidated is a very strong partner and the assets will be complementary.”