CenturyTel agreed to acquire EMBARQ, creating one of the leading communications companies in the United States. The two companies have a combined operating presence in 33 states with approximately eight million access lines and two million broadband customers. The combined company is expected to have pro forma revenue in excess of $8.8 billion, pro forma EBITDA of approximately $4.2 billion, pro forma leverage of 2.1 times EBITDA and pro forma free cash flow of approximately $1.8 billion, based on anticipated full run-rate synergies and operating results for the twelve months ended September 30, 2008.
EMBARQ, which was formerly Sprint’s Local Telecommunications Division, was spun out as an independent company in 2006.
Under the terms of the agreement, EMBARQ shareholders will receive 1.37 CenturyTel shares for each share of EMBARQ common stock they own. Based on the closing stock price for CenturyTel on October 24, 2008, this consideration would be equivalent to $40.42 of CenturyTel stock for each EMBARQ share, representing a premium to EMBARQ shareholders of approximately 36% over EMBARQ’s closing stock price on Friday.
The transaction reflects an enterprise value of approximately $11.6 billion, including the assumption of $5.8 billion of EMBARQ’s debt. Upon closing of the transaction, EMBARQ shareholders are expected to own approximately 66% and CenturyTel shareholders are expected to own approximately 34% of the combined company.
The companies said their merger will generate synergies of approximately $400 million annually within the first three years of operation. Key drivers of these synergies include reduction of corporate overhead, elimination of duplicate functions, enhanced revenue opportunities and increased operational efficiencies through the adoption of best practices and capabilities from each company.
Glen Post will be Chief Executive Officer, Tom Gerke will assume the role of executive Vice-Chairman of the Board, Karen Puckett will be Chief Operating Officer and Stewart Ewing will serve as Chief Financial Officer.
Corporate headquarters will be in Monroe, Louisiana. The combined company will also maintain a significant presence in Overland Park, Kansas.
The name of the combined company will be determined prior to the close of the transaction.
http://www.centurytel.comhttp://www.embarq.com
- In March 2008, Embarq named Tom A. Gerke, 51, as its new CEO. Since January 2007 he has led EMBARQ’s Wholesale Markets business unit, while continuing to lead the company’s legal, regulatory and external affairs functions. Before joining EMBARQ, in connection with its spin-off from Sprint Nextel, he held a variety of leadership roles at Sprint Nextel, including executive vice president and general counsel.
- In December 2007, Sprint Nextel named Daniel R. Hesse, as its new president and CEO. He previously was chairman, president and CEO of Embarq, which was previously Sprint’s Local Telecommunications Division.
