Windstream 2007 Annual Report Download - page 138

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions and Dispositions, Continued:
market. On November 28, 2006, the Company replaced the Company Securities with registered senior notes in the
same amount with the same maturity.
Pursuant to the Contribution, Alltel transferred cash of $36.2 million to the Company, as required by the
Distribution Agreement between Alltel and the Company. Additionally, Windstream received reimbursement
from Alltel in the fourth quarter for $30.6 million in transaction fees primarily related to the Company’s financing
of the spin off, which is included in other net financing activities in the consolidated statement of cash flows for
the year ending December 31, 2006. The Company’s balance sheet also includes other transferred assets and
liabilities at Alltel’s historical cost basis. Assets included net property, plant, and equipment of $106.2 million.
Transfers also included a prepaid pension asset of $192.0 million and related post-retirement benefit obligations of
$24.2 million valued at the date of spin. Deferred taxes of $71.1 million were established related to the assets and
liabilities transferred. In connection with the spin off, the Company and Alltel entered into a tax sharing
agreement that allocates responsibility for (i) filing tax returns and preparing other tax-related information and
(ii) the liability for payment and benefit of refund or other recovery of taxes. As a result, the Company transferred
liabilities to Alltel related to current income taxes payable of $102.8 million and income tax contingency reserves
of $10.8 million.
Acquisition of Valor - Immediately after the consummation of the spin off, the Company merged with and into
Valor, with Valor continuing as the surviving corporation. The resulting company was renamed Windstream
Corporation. Under the terms of the merger agreement, Valor shareholders retained each of their Valor shares,
totaling approximately 70.9 million shares, which are now shares of Windstream Corporation common stock.
Upon completion of the merger, Alltel’s shareholders owned approximately 85 percent of the outstanding equity
interests of the Company, and the shareholders of Valor owned the remaining approximately 15 percent of such
equity interests.
The merger was accounted for using the purchase method of accounting for business combinations in accordance
with SFAS No. 141, with Alltel Holding Corp. serving as the accounting acquirer. The accompanying
consolidated financial statements reflect the operations of Alltel Holding Corp. and Valor following the spin off
and merger on July 17, 2006. Results of operations prior to the merger and for all historical periods presented are
for Alltel Holding Corp.
Based on the closing price of the Company’s common stock of $11.50 on the New York Stock Exchange
(“NYSE”) on July 17, 2006, the aggregate transaction value of the merger was $2,050.5 million, consisting of the
consideration for the acquired Valor shares ($815.9 million), the assumption of Valor debt ($1,195.6 million), and
closing and other direct merger-related costs, including financial advisory, legal and accounting services.
Immediately following the merger, the Company issued 8.125 percent senior notes due 2013 in the aggregate
principal amount of $800.0 million, which was used in part to pay down the Valor credit facility in the amount of
$780.6 million.
In accordance with SFAS No. 141, the cost of the merger was allocated to the assets acquired and liabilities
assumed based on their fair values as of the close of the merger, with amounts exceeding the fair value being
recorded as goodwill.
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