AYLMER, ON – Amtelecom Income Fund announced today that it is purchasing People’s Communications for $21.3 million.
The combination of the two independent Ontario telecom firms creates “a significantly stronger player in Ontario’s independent telecommunications sector,” says the joint press release.
The deal has been unanimously approved by the People’s board of directors and Amtelecom’s board of trustees. Approval of the combination is subject to the approval of People’s shareholders. A meeting of the People’s shareholders is expected to be held on January 17, 2006 at the North Lambton Secondary School, 15 George Street in Forest, Ontario.
The resolution to be put to the People’s shareholders requires the approval of two-thirds of the votes cast, in person or by proxy. The transaction is also subject to customary conditions and court approval. “People’s board has determined that the transaction is in the best interests of People’s and its shareholders and is unanimously recommending that its shareholders vote in favour of the transaction. The transaction is expected to close on or about January 24, 2006,” adds the release.
The offering price of $50 per People’s share represents a significant premium to the last known trading price of People’s shares which was $24. People’s retained Crosbie & Company to render a fairness opinion and based on the opinion, People’s Board is recommending the sale.
The transaction combines Ontario’s 3rd largest (Amtelecom) and 10th largest (People’s) small incumbent local telephone companies, each with approximately 100 years of service history in their respective territories.
Following the transaction, the combined company will have approximately 27,000 telephone access lines, representing an increase of 24% from Amtelecom’s current levels and approximately 12,000 Internet subscribers, representing an increase of 65% from current Amtelecom levels.
Amtelecom (which also has 9,000 cable television customers) expects that the transaction “will be accretive to its cash available for distribution by 5% on a pro forma basis, excluding synergies, for the 12 months ended June 30, 2005. The combined business would have had pro forma revenues and EBITDA, excluding synergies, of $33.4 million and $17.1 million, respectively, for the 12 months ended June 30, 2005.”
"This transaction represents good value for our shareholders and creates a stronger, more diversified telecommunications company that will benefit our subscribers,” said William Vandenberg, president and CEO of People’s.
"This acquisition not only validates and supports our growth strategy, but it also fully meets our disciplined criteria for creating unitholder value,” said Michael Andrews, Amtelecom’s president and CEO, in the release. “Our two businesses are complementary as our markets and demographic characteristics are similar… These are truly exciting times for Amtelecom as we begin to deliver on our strategy of growth through acquisition.”
"Our key priority over the next 12 months is to successfully integrate the two companies and to establish a capital structure appropriate for the expanded business and the future," said David Bronicheski, chief financial officer of Amtelecom.
People’s Communications owns People’s Telephone, which provides local and long distance telephone service in Forest Ont., which is about 90 kms north of London, through approximately 5,200 residential and business access lines. People’s also provides Internet and data services through its wholly-owned subsidiary, Xcelco Internet Services, to approximately 4,650 subscribers.
