IWA Iowa Telecommunications Services

Windstream Corp. (WIN) said Tuesday it would acquire Iowa Telecommunications Services Inc. (IWA) for $530 million in stock and cash as the regional telecommunications service provider continues its shopping spree.

Iowa Telecom marks the fourth acquisition by Windstream, which over the past six months has committed to spending $1.3 billion on smaller telecommunications companies in an effort to increase its size and reach. Windstream's push underscores the need to expand in the face of heightened competition from cable and a deteriorating fixed-line business.

"Our whole investment thesis was to grow scale in rural America," Windstream Chief Executive Jeff Gardner told Dow Jones Newswires. "I still think there's a great deal of consolidation left with smaller players, where the pressure is the most obvious."

Iowa Telecom shareholders will receive 0.804 share of Windstream and $7.90 cash for each share of Iowa Telecom. Windstream plans to issue about 26.5 million shares of its stock valued at about $269 million, based on Monday's closing price, and pay $261 million in cash.

The deal values each Iowa Telecom share at $16.04, 26% more than their closing price Monday.

Windstream also will repay debt of about $598 million.

"In our opinion ... the deal is expensive and is the latest acquisition by Windstream that is pending," said Todd Rosenbluth, an analyst at Standard & Poor's equity research. "However, we still see Windstream's fundamentals as strong."

Telecommunications companies, facing more customers switching to cable phone lines or dropping landlines entirely for cellphones, have been quick to strike deals. A larger telecommunications company is able to pass its capital expenditures and operating expenses across a wider base of customers and territories. Windstream has been able to buy companies that almost immediately add to earnings and revenue, which has been able to maintain its current debt ratio and secure its dividend payout.

Windstream expects $35 million in annual merger cost savings from Iowa Telecom, which is expected to close in six to nine months. Gardner said he expects some cuts, but noted that the company would operate a call center in Iowa and keep a significant presence in the area.

Iowa Telecom, which employs about 800, serves customers in Iowa and Minnesota and has about 256,000 access lines. Windstream serves customers in 16 states and has more than 3 million access lines.

Windstream had been forced out of the bigger deals, Stifel Nicolaus & Co. analyst Christopher King said, and has been forced to focus on picking up smaller companies.

"They seem to want to plow through these quickly," he said.

Prior to Iowa Telecom, Windstream agreed to acquire D&E Communications Inc. for $169 million in stock and cash in a deal that closed earlier this month. In September, Windstream agreed to buy Lexcom Inc. (LXCM) for $141 million in cash, and in early November, the company agreed to buy NuVox Inc. for $463 million.

"We've had an unusually aggressive year in terms of acquisition," Gardner said. "That was a result of the opportunities."

While Gardner said he was in a good position after the current round of acquisitions, he wouldn't rule out further deals.

"I do think there will be other consolidation opportunities for us," he said.

Windstream isn't the only telecommunications company in the M&A game. Frontier Communications Corp. (FTR), is in the middle of acquiring a swath of non-essential wireline assets from Verizon Communications Inc. (VZ).

Windstream shares fell 0.7% to $10.06, while Iowa Telecom rose 25% to $15.89 in recent trading.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

Iowa Telecom (NYSE:IWA)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024

Iowa Telecom (NYSE:IWA)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024