Rural telecom Windstream
The telecom industry is consolidating, and fast. Windstream's move comes only months after regional telecom CenturyLink
PAETEC gives Windstream more than just an expanded footprint. There's an attractive basket of cost synergies between the two, and the deal also gives Windstream access to some $650 million of operating-loss tax write-offs. The combined value of these attributes comes out to about $150 million a year over the next five years, according to Windstream's calculations. That would be a nearly 50% boost to Windstream's $310 million of net income in 2010. It's officially a big deal.
If and when the deal closes, current PAETEC shareholders will own about 13% of the combined company. In my eyes, the improved earnings power would be worth the one-time share dilution. Fellow Fool Matt Koppenheffer disagrees on that point: he gets "a little nervous when a company makes a big acquisition with stock."
Where do you stand? Is this a smart deal or an evil harbinger of needless dilution? Add PAETEC and Windstream to your Foolish watchlist so you can keep track of this deal, then drop down to the comments box to give us your take on the situation.