Consolidated cleared one of the biggest hurdles in making good on its acquisition of FairPoint Communications as shareholders of both companies approved the deal.
About 98% of Consolidated’s shareholders who voted on the proposal cast their votes in favor of the acquisition of FairPoint, representing 71% of the company’s outstanding stock as of the record date.
FairPoint also held a special meeting where nearly 96% of the telco’s shareholders who voted on the proposal voted in favor of the merger, representing 74% of FairPoint's outstanding shares as of the record date.
Upon completing this acquisition, Consolidated will create a larger telco that will provide consumer and business services serving 24 states.
"We are committed to driving long-term growth and creating value for our stakeholders,” said Bob Udell, president and CEO of Consolidated Communications, in a release. “This merger positions Consolidated to leverage its extensive product and services portfolio across an expanded network bringing operational and service benefits to customers."
Per the terms of the agreement between the two companies, FairPoint shareholders will receive a fixed exchange ratio of 0.7300 shares of Consolidated Communications common stock for each share of FairPoint common stock.
Upon closing, Consolidated's shareholders will own approximately 71.3% of the pro forma combined company and FairPoint's shareholders will own 28.7%.
Consolidated has received Hart-Scott-Rodino Act clearance and secured the financing to fund the acquisition at what it says are favorable rates. Consolidated and FairPoint are currently working to secure the necessary state and federal regulatory approvals to complete the merger and expect the transaction to close by mid-2017.
While some investors may cite concern that Consolidated’s purchase of another traditional wireline telco is a mistake as traditional landline voice service revenues continue to decline, the service provider is keen to use the FairPoint assets to bulk up its business and consumer broadband war chest.
Like other telcos, Consolidated is not above Ethernet pricing pressure, but it is confident that the pending acquisition of FairPoint will give it a broader footprint to sell more of its services. Udell told investors during its fourth-quarter earnings call that while pricing remains an issue, particularly with wireless backhaul customers, “scale will work to our favor with the FairPoint acquisition.”