Shares of regional telecommunications company FairPoint Communications (NASDAQ: FRP) have soared today, up by 11% as of 11:30 a.m. EST, after Consolidated Communications (NASDAQ:CNSL) announced that it would acquire FairPoint.
The deal is structured as an all-stock transaction valued at $1.5 billion including debt, and both companies' boards have unanimously approved the proposed acquisition. FairPoint investors will receive a fixed exchange ratio of 0.73 shares of Consolidated Communications stock for every share of FairPoint stock that they own. Based on the average exchange ratio over the past month, the offer represents a 17.3% premium. After the deal closes, Consolidated shareholders will own 71% of the new combined company, while FairPoint shareholders will own the remaining 29%.
Consolidated CEO Bob Udell said the deal would bring together two highly complementary businesses that would offer fiber networks and a wide range of solutions for the business and broadband markets. Consolidated Communications operates in 11 states, while FairPoint operates in 17; the combined company will operate in 24 states. FairPoint CEO Paul Sunu noted that FairPoint shareholders would receive many benefits from the deal, including dividend income and cost synergies. Consolidated plans on refinancing some of FairPoint's existing debt after the deal closes, which is expected by mid-2017.