PAETEC could pay $40M if merger with Windstream fails

PAETEC (Nasdaq: PAET) may be ready to become a part of Windstream's (Nasdaq: WIN) larger business dream, but if the deal does not make it past the FCC and state PUC regulators, they'll have to pony up $40 million.

According to a filing with the U.S. Securities and Exchange Commission, Windstream said that PAETEC would have to pay up to $40 million termination charge if the deal falls through. In addition, PAETEC would have to pay $15 million in fees and other related expenses to Windstream, which would be credited towards the termination fee.

Windstream would like to close its proposed $2.3 billion acquisition of PAETEC by the end of this year, the latest in a series of acquisition moves the independent ILEC has taken over the past two years to expand its broadband and business service capabilities.

But before Windstream can add PAETEC to its growing service empire it needs to get the approval of both the FCC and various state regulators, as well as shareholders.

One of the most pressing hurdles PAETEC faces right now is that two of its shareholders have filed suits claiming that its board did not get the best price for the company.  

Not surprisingly, Windstream and PAETEC quickly dismissed those claims and said that they "believe these lawsuits are without merit and plan to vigorously defend against such claims."

For more:
- Rochester Democrat and Chronicle (N.Y.) has this article

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