Uniti Group Inc. (“Uniti”) (Nasdaq: UNIT) announced today that it
has entered into a definitive agreement to merge with Windstream
Holdings II, LLC (“Windstream”). Under the terms of the agreement,
which have been unanimously approved by both companies’ Board of
Directors, upon closing, Uniti shareholders will hold approximately
62% of the outstanding common equity of the combined company and
Windstream shareholders will hold approximately 38% of the
outstanding common equity.
The merger combines Uniti’s national wholesale
owned fiber network with Windstream’s fiber-to-the-home (“FTTH”)
business to create a premier insurgent fiber provider in the U.S.
We believe the combined company, with its scaled facilities-based
infrastructure platform, will be uniquely positioned within Tier II
and III markets throughout the U.S.
“As a combined company, we will continue our
disciplined growth trajectory while expanding FTTH buildouts and
significantly improving our overall financial profile. The demand
for fiber broadband has never been greater, and Uniti is now
expanding its reach into FTTH with an attractive scaled platform.
The combination of Uniti and Windstream also removes several
dis-synergies that exist in the current landlord/tenant
relationship and greatly enhances Uniti’s optionality for strategic
initiatives. We look forward to working with Windstream to create a
national fiber powerhouse that will continue to bridge the digital
divide for our customers,” commented President and Chief Executive
Officer of Uniti, Kenny Gunderman.
Johannes Weber, Portfolio Manager at Elliott
Investment Management (“Elliott”), Windstream’s largest
shareholder, added, “As one of the largest investors in both Uniti
and Windstream, we are pleased to support this combination, which
has a compelling strategic rationale and creates a significant
opportunity for enhanced value creation. We are confident that
given Uniti’s focused strategy, unique positioning and a proven
management team that will draw on leaders from both organizations,
the combined company will be well positioned to deliver on its
potential.”
Strategic and Financial Benefits of the
Combination
- Premier Digital Infrastructure Company: The
merger of Uniti and Windstream combines Uniti’s national wholesale
owned network with Windstream’s FTTH business. The combined company
will initially serve over 1.1 million customers and 1.5 million
existing homes passed with a particularly strong presence in the
Midwest and Southeast. Uniti will be well-positioned in the large
and growing market for digital infrastructure services,
particularly in Tier II and III markets, with a highly defensible
market position as a first mover fiber builder.
- Compelling Financial Profile with Enhanced Cash Flow
Generation: The combined company expects to benefit from
an enhanced free cash flow profile, with the ability to expand its
FTTH build by up to 1 million additional households. The
transaction is expected to be free cash flow accretive following
close and will realize additional free cash flow accretion as
synergies are achieved.
- Aligns Capital Allocation Objectives and Delivers
Meaningful Synergies: The combination is expected to
remove several dis-synergies which exist in the current
landlord/tenant relationship, as well as any potential risk to the
renewal of the master leases scheduled to occur in 2030. It also
aligns the two companies’ capital allocation objectives to improve
focus and drive results. The combination is anticipated to generate
up to $100 million of targeted annual opex synergies and $20-$30
million of targeted annual capex savings within 36 months of
closing.
- De-levered Balance Sheet: Net leverage at
year-end 2023 for the combined company is 4.8x, which is a
significant improvement over Uniti’s year-end net leverage of 6.0x,
with growth and free cash flow generation expected to improve the
combined company’s leverage trajectory over time. Both companies’
current debt silos are expected to initially remain in place
following closing.
- Enhanced Strategic Optionality: With a scaled
national platform and high-quality fiber portfolio, the additional
value creation from this transaction greatly increases Uniti’s
optionality for strategic initiatives.
Transaction Terms
Under the terms of the agreement, Uniti
shareholders will receive approximately 62% of the outstanding
common equity of the combined company. Windstream shareholders will
receive $425 million of cash, $575 million of preferred equity in
the new combined company, and common shares representing
approximately 38% of the outstanding common equity of the combined
company. Windstream shareholders will additionally receive
non-voting warrants to acquire up to 6.9% of common shares of the
combined company. Uniti expects to fund the $425 million of cash
consideration to shareholders of Windstream from operations,
revolver borrowings and/or future capital markets transactions.
Certain of Windstream’s largest shareholders,
including Elliott, which is also a current holder of Uniti’s equity
and debt, will be rolling substantially all of their investment
value in Windstream into the combined company. The transaction
structure allows both companies’ existing debt structures to remain
in-place at closing, reducing financing requirements and costs.
Leadership, Corporate Governance and
Headquarters
The combined company will be led by a proven
management team that reflects the strengths and capabilities of
both organizations. Upon closing of this transaction, the combined
company will be led by Kenny Gunderman, Uniti’s Chief Executive
Officer, and Paul Bullington, Uniti’s Chief Financial Officer.
Certain key members of Windstream’s management team are expected to
remain with the combined company as well. The combined
company will continue to operate as Uniti under the ticker “UNIT”
and be headquartered in Little Rock, Arkansas.
Following the close of the transaction, the
5-person Uniti Board of Directors (the “Board”) will remain in
place and four new directors will join the board of the combined
company, with two of those directors selected by Elliott and the
remaining two directors jointly selected by Uniti and Elliott.
Transaction Timing and
Approvals
The merger is expected to close in the second
half of 2025, subject to the satisfaction of customary closing
conditions, including receipt of regulatory approvals and approval
by Uniti shareholders.
Advisors
Bank Street Group LLC, Barclays, Centerview
Partners, and Citi are acting as co-financial advisors to Uniti.
J.P. Morgan and Stephens Inc. each acted as financial advisors to
Uniti’s Board and provided fairness opinions. Davis Polk &
Wardwell LLP is acting as legal counsel to Uniti. Goldman Sachs
& Co. LLC and Morgan Stanley & Co. LLC are acting as
financial advisors to Windstream. Debevoise & Plimpton LLP is
acting as legal counsel to Windstream.
Conference Call and Webcast
Details
Uniti will hold a conference call today to
discuss the announcement at 8:30 AM Eastern Time (7:30 AM Central
Time). The conference call will be webcast live on Uniti’s Investor
Relations website at investor.uniti.com. Those parties interested
in participating via telephone may register on the Company’s
Investor Relations website or by clicking here. A replay of the
call will be available on the Investor Relations website beginning
today at approximately 12:00 PM Eastern Time. Associated
presentation materials regarding the transaction will be available
on Uniti’s transaction microsite at unitireimagined.com and Uniti’s
Investor Relations website.
No Offer or Solicitation
This communication and the information contained
in it are provided for information purposes only and are not
intended to be and shall not constitute a solicitation of any vote
or approval, or an offer to sell or solicitation of an offer to
buy, or an invitation or recommendation to subscribe for, acquire
or buy securities of Uniti Group Inc. ("Uniti"), Windstream
Holdings II, LLC ("Windstream") or the proposed combined company
(“New Uniti”) or any other financial products or securities, in any
place or jurisdiction, nor shall there be any offer, solicitation
or sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offer of securities shall be made in the United States absent
registration under the U.S. Securities Act of 1933, as amended (the
“Securities Act”), or pursuant to an exemption from, or in a
transaction not subject to, such registration requirements.
Additional Information and Where to Find
It
Uniti and Windstream plan to file relevant
materials with the Securities and Exchange Commission (the “SEC”)
in connection with the contemplated transaction (the
“Transaction”), including a registration statement on Form S-4 with
the SEC that contains a proxy statement/prospectus and other
documents. Uniti will mail the proxy statement/prospectus contained
in the Form S-4 to its stockholders. This communication is not a
substitute for any registration statement, proxy
statement/prospectus or other documents that may be filed with the
SEC in connection with the Transaction.
THE PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION
WILL CONTAIN IMPORTANT INFORMATION ABOUT UNITI, WINDSTREAM, NEW
UNITI, THE TRANSACTION AND RELATED MATTERS. INVESTORS SHOULD READ
THE PROXY STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS FILED WITH
THE SEC CAREFULLY AND IN THEIR ENTIRETY, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THE PROXY STATEMENT/PROSPECTUS AND SUCH
DOCUMENTS, BEFORE THEY MAKE ANY DECISION WITH RESPECT TO THE
TRANSACTION. The proxy statement/prospectus, any amendments or
supplements thereto and all other documents filed with the SEC in
connection with the Transaction will be available when filed free
of charge on the SEC’s website (at www.sec.gov). Copies of
documents filed with the SEC by Uniti will be made available free
of charge on Uniti's investor relations website (at
https://investor.uniti.com/financial-information/sec-filings).
Participants in the
Solicitation
Uniti, Windstream and their respective directors
and certain of their executive officers and other employees may be
deemed to be participants in the solicitation of proxies from
Uniti’s stockholders in connection with the Transaction.
Information about Uniti’s directors and executive officers is set
forth in the sections titled “Proposal No. 1 Election of Directors”
and “Security Ownership of Certain Beneficial Owners and
Management” included in Uniti’s proxy statement for its 2024 annual
meeting of stockholders, which was filed with the SEC on April 11,
2024 (and which is available at
https://www.sec.gov/Archives/edgar/data/1620280/000110465924046100/0001104659-24-046100-index.htm),
the section titled “Directors, Executive Officers and Corporate
Governance” included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2023, which was filed with the SEC
on February 29, 2024 (and which is available at
https://www.sec.gov/ix?doc=/Archives/edgar/data/1620280/000162828024008054/unit-20231231.htm),
and subsequent statements of beneficial ownership on file with the
SEC and other filings made from time to time with the SEC.
Additional information regarding the persons who may, under the
rules of the SEC, be deemed participants in the solicitation of
Uniti stockholders in connection with the Transaction, including a
description of their direct or indirect interests, by security
holdings or otherwise, will be set forth in the proxy
statement/prospectus and other relevant materials when they are
filed with the SEC. These documents can be obtained free of charge
from the sources indicated above.
Forward-Looking Statements
This communication contains forward-looking
statements, including within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements can often
be identified by terms such as “may,” “will,” “appears,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential,” or “continue,” or the negative of these words or other
similar terms or expressions that concern expectations, strategy,
plans, or intentions. However, the absence of these words or
similar terms does not mean that a statement is not
forward-looking. All forward-looking statements are based on
information and estimates available to Uniti and Windstream at the
time of this communication and are not guarantees of future
performance.
Examples of forward-looking statements in this
communication (made at the date of this communication unless
otherwise indicated) include, among others, statements regarding
our merger with Windstream and the future performance of New Uniti
(together with Windstream and Uniti, the “Merged Group”), the
perceived and potential synergies and other benefits of the
Transaction, and expectations around the financial impact of the
Transaction on the Merged Group’s financials. In addition, this
communication contains statements concerning the intentions,
beliefs and expectations, plans, strategies and objectives of the
directors and management of Uniti and Windstream for Uniti and
Windstream, respectively, and the Merged Group, the anticipated
timing for and outcome and effects of the Transaction (including
expected benefits to shareholders of Uniti), expectations for the
ongoing development and growth potential of the Merged Group and
the future operation of Uniti, Windstream and the Merged Group.
These statements involve known and unknown
risks, uncertainties and other factors that may cause actual
results to be materially different from any results, levels of
activity, performance or achievements expressed or implied by any
forward-looking statement and may include statements regarding the
expected timing and structure of the Transaction; the ability of
the parties to complete the Transaction considering the various
closing conditions; the expected benefits of the Transaction, such
as improved operations, enhanced revenues and cash flow, synergies,
growth potential, market profile, business plans, expanded
portfolio and financial strength; the competitive ability and
position of New Uniti following completion of the Transaction; and
anticipated growth strategies and anticipated trends in Uniti’s,
Windstream’s and, following the expected completion of the
Transaction, New Uniti’s business.
In addition, other factors related to the
Transaction that contribute to the uncertain nature of the
forward-looking statements and that could cause actual results and
financial condition to differ materially from those expressed or
implied include, but are not limited to: the satisfaction of the
conditions precedent to the consummation of the Transaction,
including, without limitation, the receipt of shareholder and
regulatory approvals on the terms desired or anticipated;
unanticipated difficulties or expenditures relating to the
Transaction, including, without limitation, difficulties that
result in the failure to realize expected synergies, efficiencies
and cost savings from the Transaction within the expected time
period (if at all); potential difficulties in Uniti’s and
Windstream’s ability to retain employees as a result of the
announcement and pendency of the Transaction; risks relating to the
value of New Uniti’s securities to be issued in the Transaction;
disruptions of Uniti’s and Windstream’s current plans, operations
and relationships with customers caused by the announcement and
pendency of the Transaction; legal proceedings that may be
instituted against Uniti or Windstream following announcement of
the Transaction; funding requirements; regulatory restrictions
(including changes in regulatory restrictions or regulatory policy)
and risks associated with general economic conditions.
Additional factors that could cause actual
results, level of activity, performance or achievements to differ
materially from the results, level of activity, performance or
achievements expressed or implied by the forward-looking statements
are detailed in the filings with the SEC, including Uniti’s annual
report on Form 10-K, periodic quarterly reports on Form 10-Q,
periodic current reports on Form 8-K and other documents filed with
the SEC.
There can be no assurance that the Transaction
will be implemented or that plans of the respective directors and
management of Uniti and Windstream for the Merged Group will
proceed as currently expected or will ultimately be successful.
Investors are strongly cautioned not to place undue reliance on
forward-looking statements, including in respect of the financial
or operating outlook for Uniti, Windstream or the Merged Group
(including the realization of any expected synergies).
Except as required by applicable law,
Uniti does not assume any obligation to, and expressly
disclaims any duty to, provide any additional or updated
information or to update any forward-looking statements, whether as
a result of new information, future events or results, or
otherwise. Nothing in this communication will, under any
circumstances (including by reason of this communication remaining
available and not being superseded or replaced by any other
presentation or publication with respect to Uniti, Windstream or
the Merged Group, or the subject matter of this communication),
create an implication that there has been no change in the affairs
of Uniti or Windstream since the date of this communication.
About Uniti
Uniti, an internally managed real estate
investment trust, is engaged in the acquisition and construction of
mission critical communications infrastructure, and is a leading
provider of fiber and other wireless solutions for the
communications industry. As of March 31, 2024, Uniti owns
approximately 141,000 fiber route miles, 8.5 million fiber strand
miles, and other communications real estate throughout the United
States. Additional information about Uniti can be found on its
website at www.uniti.com.
About Windstream
Windstream’s quality-first approach connects
customers to new opportunities and possibilities by leveraging its
nationwide network to deliver a full suite of advanced
communications services. Windstream provides fiber-based broadband
to residential and small business customers in 18 states, managed
cloud communications, networking and security services for
mid-to-large enterprises and government entities across the U.S.,
and customized wavelength and dark fiber solutions for carriers,
content providers and hyperscalers in the U.S. and Canada.
Windstream, a privately held company headquartered in Little Rock,
Ark., operates three brands including Kinetic, Windstream
Enterprise and Windstream Wholesale. Additional information is
available at www.windstream.com. Follow Windstream on X
(Twitter) @Windstream.
Uniti Investor Contact:
Paul Bullington, 251-662-1512Senior Vice
President, Chief Financial Officer &
Treasurerpaul.bullington@uniti.com
Bill DiTullio, 501-850-0872Vice President, Investor Relations
& Treasurybill.ditullio@uniti.com
Uniti Media Contact:
FGS GlobalJim Barron / Kim Textor / Akash
Lodhuniti@fgsglobal.com
Windstream Investor
Contact:
Genesis Whitegenesis.white@windstream.com
Windstream Media Contact:
Brandi Stafford501-748-6250brandi.stafford@windstream.com
Scott Morris501-748-5342scott.l.morris@windstream.com
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