BCI and Searchlight Capital to Take Consolidated Communications Private for $3.1bn

Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (“Consolidated Communications” or the “Company”), a top 10 fiber provider in the United States, today announced that it has entered into a definitive agreement (the “Agreement”) to be acquired by affiliates of Searchlight Capital Partners, L.P. (“Searchlight”) and British Columbia Investment Management Corporation (“BCI”) in an all-cash transaction with an enterprise value of approximately $3.1bn, including the assumption of debt.

Searchlight, in the aggregate, is currently the beneficial owner of approximately 34% of the Company’s outstanding shares of common stock, as well as the holder of 100% of the Company’s outstanding Series A perpetual preferred stock. Under the terms of the Agreement, Searchlight and BCI will acquire all of the Consolidated common stock not already owned by Searchlight for $4.70 per share in cash.

The purchase price represents a premium of approximately 70% to the closing price of the Company’s common stock through April 12, 2023, the last trading day prior to the submission of Searchlight and BCI’s initial non-binding proposal to the Company’s Board of Directors (the “Board”), and a premium of approximately 33% to the closing price of the Company’s common stock as of October 13, 2023. The transaction implies a 9.6x multiple on the Company’s LTM EBITDA, pro forma for the previously disclosed sales of certain non-core operations, including the expected sale of Washington assets, as of June 30, 2023. The proposed transaction has been unanimously approved by a special committee of independent and disinterested directors of the Board (the “Special Committee”), advised by independent legal and financial advisors, formed to evaluate and consider the proposal and other potential strategic alternatives. The Board of Directors of the Company, following recusals of directors affiliated with Searchlight and BCI, has approved the proposed transaction on the unanimous recommendation of the Special Committee.

“We are pleased to have reached this agreement with Searchlight and BCI, which delivers a significant and certain cash premium to our shareholders,” said Robert J. Currey, the Chairman of the Consolidated Communications Board and the Special Committee Chair. “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. This transaction reflects the value of our business, taking into account both the growth opportunities of the Company’s fiber build-out, as well as the potential risks associated with the Company’s ongoing strategic transformation, including impacts from liquidity and leverage limitations within which the Company must operate, the dynamic competitive pressures of a sector-wide fiber conversion and the imperative to continue our fiber build-out.”

In connection with execution of the Agreement, Consolidated has entered into an amendment (the “Amendment”) to its credit agreement. The Amendment provides for interim financial covenant relief by increasing the maximum consolidated first lien leverage ratio permitted under the credit agreement, subject to certain conditions. The covenant relief provided for in the Amendment will provide the Company with near-term financial and operational flexibility amid a more challenging operating environment, enabling Consolidated to conservatively continue its fiber build plan between signing and closing. The Amendment will remain in effect following closing of the transaction. In the event the transaction does not close by August 1, 2025, it is expected that the financial covenant will revert to the levels that currently apply.

The proposed transaction will result in Consolidated Communications becoming a private company and is expected to close by the first quarter of 2025, subject to customary closing conditions, including receipt of regulatory approvals and approval of the holders of a majority of the voting power represented by the outstanding shares that are entitled to vote thereon and held by shareholders other than Searchlight and BCI, their investment fund affiliates and the directors and officers of the Company. The transaction is not subject to a financing condition. Following the closing of the transaction, shares of Consolidated Communications common stock will no longer be traded or listed on any public securities exchange.

Source: Businesswire

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