Consolidated Communications Holdings Inc., a top 10 fiber provider in the U.S., announced Monday that it agreed to be acquired by affiliates of Searchlight Capital Partners and British Columbia Investment Management Corp. in an all-cash transaction with an enterprise value of $3.1 billion, including the assumption of debt.
Closing is expected by the first quarter of 2025 if it clears regulators and shareholders.
Searchlight is already the beneficial owner of about 34 percent of Consolidated’s outstanding shares of common stock as well as the holder of 100 percent of its outstanding Series A perpetual preferred stock. Under 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 around 70 percent over the closing price of Consolidated’s common stock through April 12, the last trading day before the submission of Searchlight and BCI’s initial non-binding proposal to its board and a premium of 33 percent over the closing price of its common stock as of Oct. 13.
The transaction implies a 9.6 times multiple on the company’s last 12 months EBITDA including the previously disclosed sales of certain non-core operations, most notably the expected divestiture of Washington assets, as of June 30.
The proposed transaction has been unanimously approved by a special committee of independent and disinterested directors of the board – advised by independent legal and financial advisors – formed to evaluate and consider the proposal and other potential strategic alternatives.
The board, following recusals of directors affiliated with Searchlight and BCI, has approved the proposed transaction on the unanimous recommendation of the special committee.
Rothschild & Co. is serving as financial advisor to the special committee (led by Jonathan Herbst) and Cravath, Swaine & Moore is its legal counsel (led by Robert Townsend).
Goldman Sachs & Co. and J.P. Morgan Securities are financial advisors to Searchlight along with Morgan Stanley & Co., Wells Fargo, Mizuho, RBC Capital Markets and TD Securities. Wachtell, Lipton, Rosen & Katz is Searchlight’s legal counsel (Victor Goldfeld) and Weil, Gotshal & Manges is BCI’s legal counsel (Timothy Burns).
Consolidated’s in-house counsel is Garrett Van Osdell.
Latham & Watkins is providing legal counsel to Illinois-based Consolidated with a team led by Houston corporate partners Ryan Maierson and Ryan Lynch and Austin partner David Miller with associates Morgen Seim and Christina Schrantz.
Advice was also provided on tax matters by Latham partners Tim Fenn and Bryant Lee in Houston with associate Dominick Constantino; on benefits and compensation matters by Los Angeles/Orange County partner Michelle Carpenter with associate Charity Wyatt; on intellectual property matters by Washington, D.C. counsel Kieran Dickinson with associate Sanjana Parikh; on data privacy matters by Houston counsel Robert Brown with associate Lyle Stewart; and on regulatory matters by Washington, D.C. partner Elizabeth Park.
Working on real estate matters were San Diego counsel Aaron Friberg; on environmental matters Los Angeles/Houston partner Josh Marnitz with associate Olivia Pettingill; on finance matters Houston partners Matthew Jones and Pamela Kellet with associates Chris Wood, Michael Basist and Whitley Johnson; on anti-bribery and anti-corruption matters Washington, D.C./New York partner Nicholas McQuaid with associate Ryan Malo; on sanctions matters Washington, D.C., counsel Andrew Galdes; and on antitrust matters Washington, D.C. partner Jason Cruise.
Robert J. Currey, chairman of Consolidated’s board and the special committee chair, said in a statement that the transaction reflects the value of its business, taking into account the growth opportunities of its fiber build-out and the potential risks associated with its ongoing strategic transformation, including impacts from liquidity and leverage limitations within which the company must operate and the competitive pressures of a sector-wide fiber conversion.
Bob Udell, president and CEO of Consolidated, said the company believes this transaction provides substantial value for its shareholders while also enhancing its flexibility to continue the execution of its fiber expansion strategy.
“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,” he said “While we are pleased with how we have managed the business despite these headwinds, several factors recently necessitated that we delay our estimated fiber build completion beyond 2026. As we navigate this environment, we will have increased flexibility as a private company and Searchlight will continue to be an outstanding partner as we advance our transformation to a leading fiber-first provider.”
In connection with execution of the agreement, Consolidated has entered into an amendment to its credit agreement providing for interim financial covenant relief by increasing the maximum consolidated first lien leverage ratio permitted. The relief 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 company said.
The amendment will remain in effect following closing of the transaction. In the event the transaction doesn’t close by Aug. 1, 2025, it’s expected that the financial covenant will revert to the levels that currently apply.