September 13, 2010
Paetec Expected to Acquire Cavalier for $460 Million
By Susan J. Campbell, TMCnet Contributing EditorWhat better way to get a handle on the competition than to purchase all holdings? Marketwatch has reported that this same strategy is being deployed by Paetec Holdings Corp as it plans to purchase Cavalier Telephone (News - Alert) for a reported $460M.
Cavalier is a privately held company with M/C Venture Partners as its majority owner. The transaction is expected to help solidify PAETEC (News - Alert) as one of the largest competitive local communication service providers in the United States according to revenue, adjusted EBITDA and free cash flow for the 12 months ended June 30, 2010.
Paetec will use this acquisition to expand its fiber-optic network as it will add nearly 17,000 fiber-route miles to the company’s service footprint, which will allow the company to offer an alternative for last-mile connectivity to customers. This move is also expected to help reduce the company’s overall expenses as it will deliver an improved cost structure.
"This planned acquisition of Cavalier fits our strategic plan to add both fiber assets and regional density to better serve our customers and realize increased network synergies, both in the local loop and long haul," said Arunas A. Chesonis, chairman and chief executive officer of PAETEC, in a statement. "Cavalier's fiber infrastructure, network assets and corporate culture make it a perfect match for PAETEC and dramatically strengthen the company in the Eastern United States.
"Intellifiber Networks (News - Alert), Cavalier’s wholly-owned subsidiary, is one of the largest network providers in the nation with a high capacity fiber network that spans nearly 17,000 route miles and represents a more than $2 billion investment.
Broad connectivity options for customers are possible with the expansive 12,262 route mile intercity network spans the Midwest and Eastern U.S., as well as 4,689 route miles throughout several existing PAETEC metro areas.
After the closing of this transaction, PAETEC expects to gain a local presence in 86 of the top 100 Metropolitan Statistical Areas (MSAs) and a presence in 1,178 collocations. Shares of Paetec closed Friday at $4.15, down by 10 cents.
On a pro forma basis, the combined company is expected to generate about $1.95 billion in revenue and $381 million in adjusted earnings before interest, taxes, depreciation, and amortization.
"This is a major milestone in the Cavalier story. Our future has never looked brighter,"said Danny Bottoms, president & CEO of Cavalier. "This transaction will soon enable us to take advantage of a combined network and resources that are unmatched in the industry, and build upon a common culture that is singularly focused on the customer."
To find out more about PAETEC, visit the company at ITEXPO West 2010. To be held Oct. 4 to 6 in Los Angeles, ITEXPO (News - Alert) is the world’s premier IP communications event. CFO Chris Hasenauer is speaking during “Making the Business Case for SIP Trunking in the SMB.” Don’t wait. Register now.
Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.