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Windstream has reportedly entered into an agreement to acquire Newton-based Iowa Telecommunications Services in a transaction valued at approximately $1.1 billion.

 

The transaction, expected to close in mid 2010, includes Iowa Telecom’s 15 FCC (News - Alert) Advanced Wireless Service licenses and three 700 MHz Band licenses.

 

Iowa Telecom is a provider of communications services to residential and business customers in Iowa and Minnesota. The company has approximately 256,000 access lines, about 95,000 high-speed Internet customers and about 26,000 digital TV customers. Also, it has about 11 access lines per square mile across its service areas and operates an extensive fiber and IP network.

 

Under terms of the agreement approved by the board of directors of both companies, Iowa Telecom shareholders will receive 0.804 shares of Windstream (News - Alert) stock and $7.90 in cash per each Iowa Telecom share.

 

Alan L. Wells, chairman and CEO at Iowa Telecom, said that it’s an excellent transaction for the company’s shareholders, and for the customers that it serves.

“Windstream shares our commitment to both customer service and shareholder value, and we’re very pleased that our company will be joining the Windstream organization,” he said.

 

Jeff Gardner, president and CEO at Windstream, said that Wells will join the company’s board of directors; his financial acumen and executive management experience will be a tremendous asset.

 

Windstream expects to issue approximately 26.5 million shares of stock valued at approximately $269 million, based on the company’s closing stock price on Nov. 23, 2009, and pay approximately $261 million in cash as part of the transaction. The company also intends to repay estimated net debt of approximately $598 million.

 

Additionally, the company plans to finance the cash portion of the transaction and the repayment of Iowa Telecom’s outstanding debt with the proceeds from a debt financing or additional bank borrowing.

 

Company officials estimate that the transaction will be accretive to free cash flow in the first year following the closing after expected annual synergies of approximately $35 million in operating expenses and capital expenditure savings and excluding integration charges.

 

“Windstream has extensive experience with successfully integrating new properties. The transactions we have announced this year are scheduled to close in an orderly fashion over a period of time providing the opportunity for very manageable integrations,” Gardner said.