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Windstream and EarthLink to Merge in 1.1Billion TransactionNovember 07, 2016 07:00 ET Source: Windstream Holdings, Inc.Combination Creates a Stronger, More Competitive Company with Extensive National FootprintSpanning Approximately 145,000 Fiber Route MilesEnables Expanded Products, Services and Enhanced Enterprise Solutions for CustomersAnticipated Annual Operating and Capital Expenditure Synergies of More than 125 MillionRepresenting a Net Present Value of Approximately 900 Million, or More than 4.70 perWindstreamShare and 3.85 per EarthLink ShareExpected to be Significantly Accretive to Adjusted Free Cash Flow in Year One,Improving over Time as All Synergies are RealizedCompanies to Host Conference Call at 7:30 a.m. CST / 8:30 a.m. EST TodayLITTLE ROCK, Ark. and ATLANTA , Nov. 07, 2016 (GLOBE NEWSWIRE) -- WindstreamHoldings, Inc. (Nasdaq:WIN) (“Windstream”) and EarthLink Holdings Corp. (Nasdaq:ELNK)(“EarthLink”) today announced that their boards of directors have unanimously approved adefinitive merger agreement under which Windstream and EarthLink will merge in an all-stocktransaction valued at approximately 1.1 billion, including debt.Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares ofWindstream common stock for each EarthLink share owned. This ratio represents a 13 percentpremium to the average exchange ratio of 0.721x over the month ended Nov. 3, 2016, the mostrecent unaffected trading day. Windstream expects to issue approximately 93 million shares ofstock valued at approximately 673 million, based on the company’s closing stock price on Nov.4, 2016. Upon closing of the transaction, Windstream shareholders will own approximately 51percent and EarthLink shareholders will own approximately 49 percent of the combinedcompany.The combined company will have increased scale and scope giving it the ability to leverage bestpractices across a broader platform, and offer customers expanded products, services andenhanced enterprise solutions. The combination will result in an extensive national footprintspanning approximately 145,000 fiber route miles and provide advanced network connectivity,
managed services, voice, internet and other value-added services. Customers will also benefitfrom combining Windstream’s scale in the Enterprise segment and EarthLink’s successfullaunch of SD-WAN.“The combination with EarthLink further advances Windstream’s strategy by creating a stronger,more competitive business to serve our customers while increasing free cash flow and reducingleverage,” said Tony Thomas, president and chief executive officer at Windstream. “With thistransaction, we are combining two highly complementary organizations with closely alignedoperating strategies and business unit structures. We look forward to working with the talentedEarthLink team to create significant benefits and drive value for all of our stakeholders.”“We are pleased to join forces with a company that shares our core values and operatingphilosophies, and whose strategy complements our own,” said EarthLink Chief ExecutiveOfficer and President Joe Eazor. “In our work with Tony and his team, it’s become clear that weare two companies on parallel paths. We’ve both made significant progress as evidenced by ourimproving financial results and strengthening balance sheets. Now is the right time for us tocome together. We look forward to working with the Windstream team to better serve ourcustomers in a world that is becoming more network-centric every day.”Compelling Strategic and Financial Benefits Strengthens operating position through complementary networks and increasedscale: The combined company will have a robust nationwide network and deep footprintof 145,000 fiber route miles, including strategic routes located in the Southeast andNortheast U.S. In addition, Windstream’s assets add significant value to EarthLink’sexisting business by providing cost savings and increased sales opportunities. Creates net present value of approximately 900 million from synergies, plus taxbenefits: The companies have identified more than 125 million in annual operating andcapital expense synergies that are expected to be fully realized within 36 months ofclosing. Approximately 50 million of these synergies are expected to be achieved within12 months of closing and an incremental 50 million are expected to be achieved within24 months. The remaining 25 million are expected to be realized within 36 months. The 125 million of synergies has a net present value of 900 million, representing valuecreation of more than 4.70 per Windstream share and 3.85 per EarthLink share afteraccounting for integration costs. These synergies will come primarily from theoptimization of network and SG&A costs, the reduction of public company costs and theability to leverage best practices and combined operating scale to drive efficiency. Inaddition to the synergies from operations, the combined company will benefit fromEarthLink’s net operating losses, which are expected to have an estimated net presentvalue of 95 million at closing. Enhances balance sheet and increases free cash flow: Including run-rate synergies, ona pro forma basis for the 12 months ended Sept. 30, 2016, the combined company wouldhave a net leverage ratio of 3.2x. Further, the transaction will be significantly accretive to
Windstream’s adjusted free cash flow allowing greater financial flexibility for strategicnetwork investments and debt reduction while increasing dividend coverage.Management Team, Board of Directors and HeadquartersAfter the transaction closes, Tony Thomas will serve as president and chief executive officer andBob Gunderman will serve as chief financial officer of the combined company. Key EarthLinkmanagement members are expected to join the combined company to bring best-in-class talentand ensure a smooth integration.Upon close, three of EarthLink’s existing directors will join the current Windstream board ofdirectors, bringing the total number of directors of the combined company’s board to twelve.The combined company, which will retain the Windstream name, will be headquartered in LittleRock, Ark., and maintain offices in key U.S. markets.Dividend Practice and Debt FinancingConsistent with Windstream’s current dividend practice, the board of directors expects tomaintain Windstream’s annual dividend of 0.60 per share after the transaction closes, providingmeaningful benefits to shareholders in the form of long-term capital returns.At the time of closing, Windstream intends to refinance EarthLink’s gross debt of approximately 436 million.Approvals and Anticipated ClosingThe transaction is expected to close in the first half of 2017. It is subject to the satisfaction ofcertain customary conditions, including approval by the Federal Communications Commission,the expiration or termination of the applicable waiting period under the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended, applicable state-level regulatory approvals andapproval by Windstream and EarthLink shareholders.AdvisersJ.P. Morgan is acting as lead financial adviser and Skadden, Arps, Slate, Meagher & Flom LLPis acting as legal adviser to Windstream in the transaction. Barclays also acted as financialadviser and delivered a fairness opinion to the Windstream board of directors in conjunction withthe transaction.Foros is acting as lead financial adviser and has delivered a fairness opinion to EarthLink’s boardof directors. Goldman Sachs & Co. is also acting as financial adviser to EarthLink’s board ofdirectors. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Troutman Sanders LLP are actingas legal advisers to EarthLink in the transaction.
Windstream and EarthLink Third Quarter 2016 Earnings ResultsIn separate press releases issued today, Windstream and EarthLink announced their respectiveresults for the third quarter of 2016. In light of today’s transaction and third quarter earningsresults announcements, Windstream and EarthLink have cancelled their previously announcedcalls scheduled for Nov. 7, 2016, at 9:00 a.m. CST / 10:00 a.m. EST and 7:30 a.m. CST / 8:30a.m. EST, respectively.Transaction Conference CallWindstream and EarthLink will hold a joint conference call at 7:30 a.m. CST / 8:30 a.m. ESTtoday to review the transaction as well as both companies’ third quarter 2016 results.Interested parties in the United States can access the call by dialing 1-877-374-3977, conferenceID 99942553, fifteen minutes prior to the start time. International participants should dial 1-253237-1161.A joint presentation will be available at www.windstream.com/investors and ir.earthlink.net.Webcast InformationThe conference call also will be streamed live over the companies' websites atwww.windstream.com/investors and ir.earthlink.net. A replay of the webcast will be available onthe companies’ websites beginning at noon CST on Nov. 7 and ending at noon CST on Nov. 14.To Access the Call ReplayA replay of the call will be available beginning at noon CST on Nov. 7 and ending at noonCST on Nov. 14. The replay can be accessed by dialing 1-855-859-2056, conference ID99942553. International participants should dial 1-404-537-3406.About WindstreamWindstream Holdings, Inc. (NASDAQ:WIN), a FORTUNE 500 company, is a leading providerof advanced network communications and technology solutions for consumers, businesses,enterprise organizations and wholesale customers across the U.S. Windstream offers bundledservices, including broadband, security solutions, voice and digital TV to consumers. Thecompany also provides data, cloud solutions, unified communications and managed services tobusiness and enterprise clients. The company supplies core transport solutions on a local andlong-haul fiber network spanning approximately 129,000 miles. Additional information isavailable at windstream.com. Please visit our newsroom at news.windstream.com or follow us onTwitter at @Windstream.
About EarthLinkEarthLink (EarthLink Holdings Corp.) (NASDAQ:ELNK) is a leading network services providerdedicated to delivering great customer experiences in a cloud connected world. We helpthousands of multi-location businesses securely establish critical connections in the cloud. Oursolutions for cloud and hybrid networking, security and compliance, and unifiedcommunications provide the cost-effective performance and agility to serve customers anytime,anywhere, via any channel, or any device. We operate a nationwide network spanning 29,000 fiber route miles, with 90 metro fiber rings and secure data centers that provide ubiquitous dataand voice IP coverage. To learn why thousands of specialty retailers, restaurants, franchisors,financial institutions, healthcare providers, professional service firms, local governments,residential consumers and other carriers choose to connect with us, visit usat www.earthlink.com, @earthlink, on LinkedIn and Google .Cautionary Statement Regarding Forward-Looking StatementsWindstream Holdings, Inc. and EarthLink Holdings Corp. claim the protection of the safe-harborfor forward-looking statements contained in the Private Securities Litigation Reform Act of1995. Forward-looking statements are typically identified by words or phrases such as “will,”“anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast” andother words and terms of similar meaning. Forward-looking statements are subject to risks anduncertainties that could cause actual future events and results to differ materially from thoseexpressed in the forward-looking statements.Forward-looking statements include, but are not limited to, 2016 guidance for revenue, adjustedOIBDAR and adjusted capital expenditures, along with statements regarding adjusted free cashflow, cash interest and cash taxes; expectations regarding revenue trends and improving marginsin the business segments; network cost optimization; stability and growth in adjusted OIBDAR;for Windstream, the anticipated benefits of Project Excel, of network investments pursuant to theConnect America Fund, and of enhanced services available to customers; the ability to improveits debt profile and reduce interest costs; statements about the benefits of the proposed mergerwith EarthLink, including future financial and operating results, future revenue, projectedsynergies in operating and capital expenditures, the expected availability of net operating losscarryforwards to reduce future cash tax expenses, net leverage, adjusted OIBDA/OIBDAR, andadjusted free cash flow; Windstream and EarthLink’s expected dividend policy between theannouncement of the transaction and proposed completion of the merger, and the dividend policyfor the proposed combined company after the merger; the expected timing of completion of thetransaction that is contingent upon stockholder approval of both companies and certainregulatory approvals, along with plans, objectives, expectations and intentions and otherstatements that are not historical facts. These statements, along with other forward-lookingstatements regarding Windstream’s and EarthLink’s overall business outlook, are based onestimates, projections, beliefs, and assumptions that Windstream believes is reasonable but arenot guarantees of future events, performance or results. Actual future events and results maydiffer materially from those expressed in these forward-looking statements as a result of anumber of important factors.
Important factors that could cause actual results to differ materially from those indicated by suchforward-looking statements are set forth in Windstream’s and EarthLink’s respective filings withthe Securities and Exchange Commission. These include risks and uncertainties relating to: theability to obtain the requisite Windstream and EarthLink stockholder approvals; the ability tosatisfy the conditions to consummation of the merger, including obtaining governmental andregulatory approvals required for the merger; the risk that required governmental and regulatoryapprovals may delay the merger or result in the imposition of conditions that could cause theparties to abandon the merger or materially impact the financial benefits of the merger; timing toconsummate the proposed merger; the risk that the businesses will not be integrated successfully;the risk that the cost savings and any other synergies from the transaction may not be fullyrealized or may take longer to realize than expected; the anticipated future cash requirements ofthe proposed combined company; disruption from the proposed transaction making it moredifficult to maintain relationships with customers, employees or suppliers; the diversion ofmanagement time on merger-related issues; dividend policy changes for the proposed combinedcompany; general worldwide economic conditions and related uncertainties; and the effect ofchanges in governmental regulations. Neither Windstream nor EarthLink undertake anyobligation to publicly update any forward-looking statement, whether as a result of newinformation, future events or otherwise.Additional Information And Where To Find ItThis communication does not constitute an offer to sell or the solicitation of an offer to buy anysecurities or a solicitation of any vote or approval. In connection with the proposed mergerbetween Windstream and EarthLink, Windstream will file with the SEC a Registration Statementon Form S-4 that will include a joint proxy statement of Windstream and EarthLink that alsoconstitutes a prospectus of Windstream. Windstream and EarthLink will mail the joint proxystatement/prospectus to their respective shareholders. Windstream and EarthLink urge investorsand shareholders to read the joint proxy statement/prospectus regarding the proposed mergerwhen it becomes available, as well as other documents filed with the SEC, because they willcontain important information. You may obtain copies of all documents filed with the SECregarding this transaction, free of charge, at the SEC’s website (www.sec.gov). You may alsoobtain these documents, free of charge, from Windstream’s website(www.windstream.com/investors). You may also obtain these documents, free of charge, fromEarthLink’s website (ir.earthlink.net) on the Investors page.Participants In The Merger SolicitationWindstream, EarthLink and their respective directors, executive officers and certain othermembers of management and employees may be soliciting proxies from Windstream andEarthLink shareholders in favor of the merger and related matters. Information regarding thepersons who may, under the rules of the SEC, be deemed participants in the solicitation of thecompanies’ shareholders in connection with the proposed merger will be set forth in the jointproxy statement/prospectus when it is filed with the SEC. You can find information aboutWindstream’s executive officers and directors in its definitive proxy statement filed with theSEC on April 1, 2016. You can find information about EarthLink’s executive officers anddirectors in its definitive proxy statement filed with the SEC on March 15, 2016. Additional
information about Windstream’s executive officers and directors and EarthLink’s executiveofficers and directors can be found in the above-referenced Registration Statement on Form S-4when it becomes available. You can obtain free copies of these documents from the companiesusing the website information above.Regulation G DisclaimerThis presentation includes certain non-GAAP financial measures. Reconciliations of these nonGAAP financial measures to the most directly comparable GAAP financial measures areavailable on our website at www.windstream.com/investors.Net present value of synergies referred to herein assumes integration costs to achieve synergiesof 125 million; assumes a discount rate of 8.5% and a tax rate of 37%. Per share calculationassumes Windstream pro forma ownership of 51% and 97 million shares outstanding, andEarthLink pro forma ownership of 49% and existing shares outstanding of 114 million.ContactsWindstream Media Contact:David Avery, [email protected] Media Contact:Jeff Crow, [email protected] Frank, Wilkinson Brimmer KatcherJames Golden/Daniel Moore/Nicholas Leasure212-355-4449Sard Verbinnen & CoDrew Brown/Robin Weinberg, comWindstream Investor Contact:Mary Michaels, [email protected] Investor Contact:Trey Huffman, [email protected]
Windstream Share and 3.85 per EarthLink Share Expected to be Significantly Accretive to Adjusted Free Cash Flow in Year One, Improving over Time as All Synergies are Realized Companies to Host Conference Call at 7:30 a.m. CST / 8:30 a.m. EST Today LITTLE ROCK, Ark. and ATLANTA , Nov.
