NEWS RELEASE
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Steve Marcus
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2007-01-15T20:25:00Z
2007-01-16T03:23:00Z
2007-01-16T05:30:00Z
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January 16, 2007
Verizon and FairPoint Agree to Merge Verizons
Wireline Businesses in Maine, New Hampshire and Vermont
With Current Operations of FairPoint
-- Verizon to Spin Off These Wireline Businesses Prior
to Merger --
FairPoint to Add Jobs, Provide Seamless Transition for Current
Employees and Invest in Increased Broadband Access for Consumers in Northern New England
NEW YORK Verizon Communications Inc. (NYSE: VZ) and FairPoint
Communications, Inc. (NYSE: FRP) today announced definitive agreements
that will result in Verizon establishing a separate entity for its local
exchange and related business assets in Maine, New Hampshire and Vermont, spinning
off that new entity to Verizons stockholders, and merging it with and into
FairPoint.
FairPoint, based
in Charlotte, N.C.,
is a telecommunications provider with 31 local exchange companies in 18 states,
serving the unique needs of customers in rural and small urban markets. FairPoint provides an array of services,
including local and long-distance voice, data, Internet and broadband.
Verizons Maine,
New Hampshire and Vermont properties serve approximately
1.5 million access lines, approximately 180,000 DSL customers and approximately
600,000 long-distance customers (as of Sept. 30, 2006).
We believe this
transaction will create an opportunity for further investment in Maine,
New Hampshire and Vermont,
strengthen the regions economy by creating jobs and improve service to
customers through capital investment, said Gene Johnson, chairman and CEO of
FairPoint. At the same time, we have
accelerated FairPoints growth through a single transaction, creating a much
larger company with increased financial strength and flexibility that will
continue to focus on maximizing value for investors.
Virginia
Ruesterholz, president of Verizon Telecom, said, This deal is great for
consumers. They can count on continued
top service from the new company that will have a focus on northern New
England. The transaction
also ensures the fair and equitable treatment of employees in these New
England states, who have performed outstanding work for our
customers for many years.
In our view, Ruesterholz
added, this agreement provides a fair value for this property and allows
Verizon to focus more intently on operations in other markets. It shows how Verizon
continually looks for creative and attractive ways to add value for our
shareholders.
Increased
Employment and Broadband Availability
Approximately 3,000 Verizon
company employees -- those who support primarily the local phone business that
is spun off -- will continue employment with FairPoint after the merger. Approximately 300 Verizon company employees
in Maine, New Hampshire and Vermont who provide national or
regional support services will remain with the Verizon company that currently
employs them.
FairPoint and
Verizon will provide a smooth transition for employees. FairPoint will honor the union labor agreements
in these states and expects to work constructively with union leaders. Subsequent to the merger, FairPoint expects
to add approximately 600 positions to the current employee base serving the
three states. FairPoint
will also strengthen the local operational presence and create new local
service centers to deliver industry-leading customer service.
Additionally, FairPoint plans to significantly increase
broadband availability in the region within the first 12 months after the
merger is completed.
Our goal at FairPoint is to respond to customers, and we
will have sufficient scale to continue to offer enhanced services on a robust
network platform, said Johnson. That
means we can deliver a broader range of communications products and services.
The transaction is targeted to
be completed within the next 12 months. It
requires approval from FairPoint stockholders, certain state and federal
regulatory approvals, and satisfaction of other customary closing conditions.
Transaction
Details, Tax-Free Distribution
Verizons local exchange and related business assets in Maine, New Hampshire and Vermont will be transferred
to entities owned by a newly organized, wholly owned subsidiary of
Verizon. This new subsidiary will incur
$1.7 billion of newly issued debt and will then be spun off to Verizons
stockholders and immediately merged with and into FairPoint.
When the merger is
completed, the companies conducting the Maine, New Hampshire and Vermont telephone and related
business operations will be subsidiaries of FairPoint. The combined business will be managed by
FairPoints executive team.
Upon the closing of
the transaction, Verizon stockholders will own approximately
60 percent of the new company, and FairPoint stockholders will own
approximately 40 percent. In connection
with the merger, Verizon stockholders will receive one share of FairPoint stock
for approximately every 55 shares of Verizon stock held as of the record
date. Both the spin-off and merger are
expected to qualify as tax-free transactions, except to the extent that cash is
paid to Verizon stockholders in lieu of fractional shares.
Verizon Communications
will not own any shares in FairPoint after the merger.
The total value to be
received by Verizon and its stockholders in exchange for these operations will
be approximately $2.715 billion. Verizon
stockholders will receive approximately $1.015 billion of FairPoint common
stock in the merger, based upon FairPoints recent stock price and the terms of
the merger agreement. Verizon will
receive $1.7 billion in value through a combination of cash distributions to
Verizon and debt securities issued to Verizon prior to the spin-off. Verizon may exchange these newly issued debt
securities for certain debt that was previously issued by Verizon, which would
have the effect of reducing Verizons then-outstanding debt on its balance
sheet.
The transaction
includes Verizons switched and special access lines in the three states, as
well as its Internet service, enterprise voice CPE (customer premises
equipment) accounts, and long-distance voice and private line customer accounts
(for customer private lines with beginning and ending points within the three
states) that Verizon served in the region before the 2006 merger with MCI, Inc. The transaction does not include the
services, offerings or assets of Verizon Wireless, Verizon Business (former
MCI), Federal Network Systems LLC, Verizon Network Integration Corp., Verizon
Global Networks Inc., Verizon Federal Inc. or any other Verizon businesses in
these states.
FairPoint expects that the transaction will be accretive to
free cash flow of FairPoint upon completion of the transition, and it expects
that its current annual dividend of $1.59 per share will continue unchanged
following the closing. All owners of FairPoint shares on dividend record dates
after the merger is completed, including Verizon stockholders who will have received
FairPoint shares in this transaction, will be eligible to receive declared
dividends.
FairPoints management anticipates that the merged company
will be able to generate improved operational performance through management
focus, local/regional marketing and customer service initiatives, and future
development of innovative technology and processes.
Building on Verizons Operating Strength
FairPoint is a leading provider of
communications services to rural communities.
Its commitment to quality customer service was a key factor in our
decision to enter into this transaction with FairPoint, Verizons Ruesterholz
said. We know that FairPoint has a deep
understanding of the local phone business and a determination to build on Verizons
operating strength in this region.
FairPoints
Johnson said, This is a value-creating event for multiple parties. Customers, employees and shareholders will
all benefit from the transaction.
We are prepared
to make additional investments in the state networks to maintain and improve
the highly reliable, state-of-the-art networks in the three states, he
continued. We are confident that our
experience as a major operator will enable us to provide outstanding service
and innovative products for our new customers. FairPoints established expertise in
operating telephone properties in rural areas will now be leveraged in the new Maine, New
Hampshire and Vermont markets.
A Verizon
transition team will work with FairPoint in the coming months to ensure
customer accounts, billing information, and other assets from the operations
are successfully transferred to FairPoint and that the transition is seamless
for customers and employees.
Verizon was
advised in the transaction by Merrill Lynch & Co. Lehman Brothers acted as FairPoints lead
financial adviser in this transaction.
Deutsche Bank Securities and Morgan Stanley also acted as advisers to
FairPoint.
About Verizon
Verizon Communications Inc.
(NYSE: VZ), a New York-based Dow 30 company, is a leader in delivering
broadband and other wireline and wireless communication innovations to mass
market, business, government and wholesale customers. Verizon Wireless
operates America's most reliable wireless network, serving nearly 57
million customers nationwide. Verizon's Wireline operations include
Verizon Business, which operates one of the most expansive wholly-owned global
IP networks, and Verizon Telecom, which is deploying the nation's most advanced
fiber-optic network to deliver the benefits of converged communications,
information and entertainment services to customers. For more
information, visit www.verizon.com.
VERIZONS ONLINE NEWS CENTER:
Verizon news releases, executive speeches and biographies, media contacts, high
quality video and images, and other information are available at Verizons News Center on the World Wide Web at www.verizon.com/news. To receive news releases by e-mail, visit the
News Center and register for customized automatic delivery of
Verizon news releases.
About FairPoint
FairPoint is a leading provider of communications services to
rural communities across the country.
Incorporated in 1991, FairPoints mission is to acquire and operate
telecommunications companies that set the standard of excellence for the
delivery of service to rural communities.
Today, FairPoint owns and operates 31 local exchange companies located
in 18 states offering an array of services, including local and long distance
voice, data, Internet and broadband offerings.
This press release may contain forward-looking
statements by FairPoint that are not based on historical fact, including,
without limitation, statements containing the words expects, anticipates,
intends, plans, believes, seeks, estimates and similar expressions
and statements related to potential cost savings and synergies expected to be
realized in the merger. Because these forward-looking statements involve known
and unknown risks and uncertainties, there are important factors that could
cause actual results, events or developments to differ materially from those
expressed or implied by these forward-looking statements. Such factors include
those risks described from time to time in FairPoints filings with the
Securities and Exchange Commission, including, without limitation, the risks
described in FairPoints most recent Annual Report on Form 10-K on file with
the Securities and Exchange Commission.
These factors should be considered carefully and readers are cautioned
not to place undue reliance on such forward-looking statements. All information is current as of the date
this press release is issued, and FairPoint undertakes no duty to update this
information. Source: FairPoint
Communications, Inc., www.fairpoint.com.
FairPoint intends to file a
registration statement, including a proxy statement, and other materials with
the Securities and Exchange Commission (SEC) in connection with the proposed
merger. We urge investors to read these
documents when they become available because they will contain important information. Investors will be able to obtain copies of the
registration statement and proxy statement, as well as other filed documents
containing information about FairPoint and the merger, at www.sec.gov, the SECs website, or at www.fairpoint.com/investor, when they are available. Investors may also obtain free copies of
these documents and the Companys SEC filings at www.fairpoint.com under the Investor Relations section, or
by written request to FairPoint Communications, Inc., 521 E. Morehead Street, Suite 250, Charlotte,