Windstream 2010 Annual Report Download - page 65

Windstream Corporation
Form 10-K, Part I
Item 1. Business
customers in North Carolina. This acquisition increased Windstream’s presence in North Carolina and provides the
opportunity for operating synergies with contiguous Windstream markets. In accordance with the Lexcom merger
agreement, Windstream acquired all of the issued and outstanding shares of Lexcom common stock for $138.7 million
in cash, net of cash acquired.
On November 10, 2009, Windstream completed the merger with D&E Communications, Inc. (“D&E”), which resulted
in the addition of approximately 110,000 ILEC access lines, 35,000 CLEC access lines, 45,000 high-speed Internet
customers and 9,000 cable television customers. This acquisition increased Windstream’s presence in Pennsylvania and
provides the opportunity for operating synergies with contiguous Windstream markets. Pursuant to the merger
agreement, Windstream acquired all of the issued and outstanding shares of common stock of D&E, and D&E merged
with and into a wholly-owned subsidiary of Windstream. In accordance with the D&E merger agreement, D&E
shareholders received 0.650 shares of Windstream common stock and $5.00 in cash per each share of D&E Common
Stock. Windstream issued approximately 9.4 million shares of its common stock valued at $94.6 million, based on
Windstream’s closing stock price of $10.06 on November 9, 2009, and paid $56.6 million, net of cash acquired, as part
of the transaction. Windstream also repaid outstanding debt of D&E Communications totaling $182.4 million.
On August 31, 2007, Windstream completed the acquisition of CT Communications, Inc. (“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 short-term
investments held by CTC. Including $25.3 million in severance and other transaction-related expenses, the total cost of
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 acquisition of CTC
significantly increased Windstream’s operating presence in North Carolina through the addition of approximately
132,000 access lines and 31,000 high-speed Internet customers and provided the opportunity to generate significant
operating efficiencies with contiguous Windstream markets.
As previously discussed, on July 17, 2006, Alltel Holding Corp. merged with and into Valor, with Alltel Holding Corp.
serving as the accounting acquirer. Through this transaction, Windstream added approximately 500,000 customers in
complementary markets with favorable rural characteristics making the Company one of the largest local
telecommunications carriers in the United States.
MATERIAL DISPOSITIONS
On November 21, 2008, Windstream completed the sale of its wireless business to AT&T Mobility II, LLC for
approximately $56.7 million. The completion of this transaction resulted in the divestiture of 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. The operating results of the wireless business have been separately
presented as discontinued operations in the accompanying consolidated statements of income.
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.
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