Windstream plans new debt or bank borrowings for Iowa Telecom buy

By Sara Rosenberg

New York, Nov. 24 - Windstream Corp. plans to get new debt financing or additional bank borrowings to help fund its acquisition of Iowa Telecommunications Services Inc., according to a news release.

Under the roughly $1.1 billion acquisition agreement, Iowa Telecommunications' shareholders will receive 0.804 shares of Windstream stock and $7.90 in cash per share, and Iowa Telecommunications' debt will be repaid.

Proceeds from Windstream's new debt financing or additional bank debt will be used for the repayment of about $598 million of Iowa Telecommunications' debt and the roughly $261 million cash portion of the acquisition.

For the stock portion of the deal, Windstream expects to issue about 26.5 million shares of stock valued at about $269 million, based on the company's closing stock price on Nov. 23.

Windstream estimates the transaction will be accretive to free cash flow in the first year following the closing, after expected annual synergies of about $35 million in operating expenses and capital expenditure savings and excluding integration charges.

On a pro forma basis for the acquisition of Sherburne Tele Systems Inc. in the 12 months ended Sept. 30, Iowa Telecommunications generated about $275 million in revenue, $130 million in operating income before depreciation and amortization and $69 million in free cash flow.

On a pro forma basis following completion of pending transactions with Lexcom, NuVox and Iowa Telecommunications, as well as the recently completed acquisition of D&E Communications, Windstream will have about $4 billion in revenue and about $2 billion in operating income before depreciation and amortization.

Closing is anticipated to take place in mid-2010, subject to certain conditions, including necessary approvals from federal and state regulators and Iowa Telecommunications shareholders.

Windstream is a Little Rock, Ark.-based provider of phone, high-speed internet and high-definition digital TV services. Iowa Telecom is a Newton, Iowa-based provider of communications services to residential and business customers.

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