|
|
| |
| Fri, Nov. 21, 2008 |  |
 |
|
||
| |
Windstream poised to make acquisitions, analyst says Wednesday, May 28, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - Conditions are favorable for Windstream Corp. to make acquisitions after a restriction on the amount of shares it can issue expires July 18, Credit Suisse analysts said in a memo Tuesday. Rural local exchange carriers' weak stocks, high yields and accelerated access line losses at the hands of greater cable competition and wireless substitution make a select group of companies ripe for the picking, the analysts said. As part of its spin-off agreement with Alltel Corp., Windstream is limited in the number of shares it can issue for an acquisition or to raise capital. The soon-to-expire restriction is intended to prevent Windstream for taking action that could cause the spin-off to be taxable to Alltel. "Given the expiration of this restriction, the indications of interest in M&A from management and depressed valuations, we think Windstream is a prime candidate to drive industry consolidation," Credit Suisse research analysts said. Citizens Communications Co., Consolidated Holdings Inc. and Iowa Telecom could all be targets, according to the memo. Embarq Corp., the local landline spin-off from Sprint, is positioned similarly to Windstream and could also acquire those companies, the memo said. A spokesman for Windstream declined to comment, but in a May 9 conference call on its first-quarter earnings, Windstream CEO Jeff Gardner said acquisitions were attractive to the company. "You can continue to build stronger companies, improve positioning from a scale and scope perspective," Gardner said. "We're hopeful there will be opportunities for us to really leverage those things in the near to medium term." The analysts wrote that Windstream could maintain its current free cash flow yields if it were to acquire one of the companies at a premium. Windstream could pay $14 per share for Citizens, a 27 percent premium based on Friday's closing price, and not dilute its 2009 and 2010 free cash flow yields. Such a deal would increased Windstream's access lines by 75 percent and its broadband connections by 60 percent, according to the analysts. It would also generate annual synergies of $100 million to $200 million, 10 percent to 20 percent of Citizen's operating expenses, they said. Similarly, Windstream could pay $22 a share for Consolidated, a 60 percent premium. Shares of Citizens (NYSE: CZN) rose 4.8 percent, or 53 cents, on Tuesday to $11.55. Shares of Consolidated (NasdaqGM: CNSL) rose 8.4 percent, or $1.16, to $14.93. Shares of Windstream (NYSE: WIN) rose 41 cents Tuesday to $13.24. |
