Windstream 2008 Annual Report Download - page 92

provided: either net sales of the Company as a percentage of net sales of Alltel, total assets of the Company as a
percentage of total assets of Alltel, or headcount of the Company as a percentage of headcount of Alltel. Management
of both the Company and Alltel considered these allocations to be a reasonable reflection of the utilization of services
provided.
Acquisitions
Immediately after the consummation of the spin off, the Company merged with and into Valor, with Valor continuing
as the surviving corporation and Alltel Holding Corp. serving as the accounting acquirer. The resulting company was
renamed Windstream Corporation. As a result of the merger, all of the issued and outstanding shares of the Company’s
common stock were converted into the right to receive an aggregate number of shares of common stock of Valor. Valor
issued in the aggregate approximately 403 million shares of its common stock to Alltel shareholders pursuant to the
merger, or 1.0339267 shares of Valor common stock for each share of the Company’s common stock outstanding as of
the effective date of the merger. Upon completion of the merger, Alltel’s shareholders owned approximately 85 percent
of the outstanding equity interests of Windstream, and the shareholders of Valor owned the remaining approximately
15 percent of such equity interests. In addition, Windstream assumed Valor debt valued at $1,195.6 million.
On August 31, 2007, Windstream completed the acquisition of CTC in a transaction valued at $584.3 million. Under
the terms of the agreement the shareholders of CTC received $31.50 in cash for each of their shares with a total cash
payout of $652.2 million. The transaction value also includes a payment of $37.5 million made by Windstream to
satisfy CTC’s debt obligations, offset by $105.4 million in cash and cash equivalents held by CTC. Including $25.3
million in severance and other transaction-related expenses, the total net consideration paid in the acquisition was
$609.6 million. Windstream financed the transaction using the cash acquired from CTC, $250.0 million in borrowings
available under its revolving line of credit, and additional cash on hand. The accompanying financial statements reflect
the combined operations of Windstream and CTC following the acquisition.
The premium paid by Windstream in this transaction is attributable to the strategic importance of the CTC acquisition.
The access lines and high-speed Internet customers added through the acquisition will significantly increase
Windstream’s presence in North Carolina and provide the opportunity to generate significant operating efficiencies
with contiguous Windstream markets. The transaction has increased Windstream’s position in these markets where it
can leverage its brand and bring significant value to customers by offering competitive bundled services.
Disposition
On November 21, 2008, Windstream completed the sale of its wireless business to AT&T Mobility II, LLC for
approximately $56.7 million. Windstream recognized a pre-tax loss of $21.3 million to reduce the carrying value of the
assets sold to the transaction price less costs to sell. The completion of the transaction allowed management to divest of
a non-core asset. The transaction includes approximately 52,000 wireless customers, spectrum licenses and cell sites
covering a four-county area of North Carolina with a population of approximately 450,000, and six retail locations.
On November 30, 2007, Windstream completed the split off of its directory publishing business (the “publishing
business”) in a tax-free transaction with entities affiliated with Welsh, Carson, Anderson & Stowe (“WCAS”), a private
equity investment firm and Windstream shareholder.
To facilitate the split off transaction, Windstream contributed the publishing business to a newly formed subsidiary
(“Holdings”). Holdings paid a special cash dividend to Windstream in an amount of $40.0 million, issued additional
shares of Holdings common stock to Windstream, and distributed to Windstream certain debt securities of Holdings
having an aggregate principal amount of $210.5 million. Windstream exchanged the Holdings debt securities for
outstanding Windstream debt securities with an equivalent fair market value, and then retired those securities.
Windstream used the proceeds of the special dividend to repurchase approximately three million shares of Windstream
common stock during the fourth quarter of 2007. Windstream exchanged all of the outstanding equity of Holdings (the
“Holdings Shares”) for an aggregate of 19,574,422 shares of Windstream common stock (the “Exchanged WIN
Shares”) owned by WCAS, which were then retired. Based on the price of Windstream common stock of $12.95 at
November 30, 2007, the Exchanged WIN Shares had a value of $253.5 million. The total value of the transaction was
$506.7 million, including an adjustment for net working capital of approximately $2.7 million. As a result of
completing this transaction, Windstream recorded a gain on the sale of its publishing business of $451.3 million in the
fourth quarter of 2007, after substantially all performance obligations had been fulfilled.
In connection with the consummation of the transaction, the parties and their affiliates entered into a publishing
agreement whereby Windstream granted Local Insight Yellow Pages, Inc. (“Local Insight Yellow Pages”), the
successor to the Windstream subsidiary that once operated the publishing business, an exclusive license to publish
Windstream directories in each of its markets other than the newly acquired CTC markets. Local Insight Yellow Pages
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