ITC^DeltaCom Inc. on Wednesday announced an agreement to merge with two Florida telecommunications providers, Florida Digital Network Inc., and NT Corp, the parent company of Network Telephone Corp., in stock agreements.
The combined company will serve approximately 120,000 business customers in 45 southeastern markets and support 635,000 retail voice lines, making West Point, Ga.,-based ITC^DeltaCom among the Southeast’s biggest competitors to Atlanta-based BellSouth Corp.
Larry Williams, chairman and CEO of ITC^DeltaCom, will lead the combined company.
The news comes less than a year after ITC^DeltaCom announced closing the merger of BTI Telecom Corp.
“This deal further validates that the industry consolidation we have all been waiting for is well on its way and general health in the sector is improving,” Needham & Co. analysts said Wednesday in a research note, which rates ITC^DeltaCom a “strong buy.”
ITC^DeltaCom is projected to generate approximately $800 million in annual revenue and $100 million in earnings before interest, taxes, depreciation and amortization upon completion of the mergers, ITC^DeltaCom executives say.
The terms of the agreements call for ITC^DeltaCom to issue 31.3 million shares of common stock to Florida Digital Network shareholders and 8.85 million shares of common stock to National Telephone shareholders, leaving ITC^DeltaCom’s current majority stakeholder -- Welsh, Carson, Anderson & Stowe -- with 38 percent of the voting equity in the company. ITC^DeltaCom expects to incur less than $2 million in debt and add $23 million to $25 million to its coffers following completion of the agreements.
ITC^DeltaCom executives say the mergers would expand the network – adding about 200 colocation facilities where the company does not have a presence -- and help reduce its exposure to changing regulations because ITC^DeltaCom could migrate more lines to its own facilities from the incumbent phone network.
Florida Digital Network generates approximately $140 million in annual revenue and serves 55,000 business customers in seven markets, while Network Telephone books about $65 million with 17,000 business customers in 27 markets across the Southeast, according to ITC^DeltaCom. Florida Digital Network and Network Telephone have a combined workforce of about 1,100 employees. ITC^DeltaCom has 2,300 employees.
ITC^DeltaCom expects the mergers to close late in the fourth quarter or early in the first quarter of 2005. The company plans to file additional details about the planned mergers with the Securities and Exchange Commission.
