Windstream (Nasdaq: WIN) may have put fears to rest that it would not complete its acquisition of PAETEC (Nasdaq: PAET) on time as the service provider reached a settlement with shareholders.
Previously, a group of PAETEC shareholders represented by Boston-based Kyros & Pressly LLP and San Diego-based Robbins Umeda LLP conducted an investigation into whether they could have gotten a higher bid from a rival service provider like Level 3 Communications (Nasdaq: LVLT).
Under the terms of the Memorandum of Understanding (MOU), a number of new disclosures about the deal have been added to information previously disclosed in earlier proxies. Also, PAETEC and Windstream executives won't be liable and the lawsuit initially filed in a Delaware state court will be dismissed and can't be refiled.
"Windstream, PAETEC and the other defendants deny all of the allegations in the Consolidated Lawsuit and believe the disclosures in the proxy statement/prospectus are adequate under the law," Windstream said in a statement. "Nevertheless, Windstream, PAETEC and the other defendants have agreed to settle the consolidated lawsuit in order to avoid costly litigation and reduce the risk of any delay to the completion of the merger."
Neither Windstream nor PAETEC revealed the financial terms of the settlement.
Some of the disclosures added in the MOU include the fact that PAETEC CEO and Chairman Arunas Chesonis said in a July 8 meeting that he would not join Windstream after the deal was completed and that PAETEC had an "exclusivity agreement" with Windstream that barred it from considering other bids for the company.
Last week, a FBR Capital Markets report intimated that Level 3 was going to make a bid for the CLEC not long after it completed its own separate acquisition of Global Crossing.
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