Files Definitive Proxy
Urges Shareholders to Protect Their Investments
by Voting FOR the Proposed Transaction
Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the
“Company” or “Consolidated”), a top 10 fiber provider in the U.S.,
today announced that it has filed its definitive proxy statement.
The Company has also filed a letter to shareholders in connection
with its upcoming special meeting of shareholders (the “Special
Meeting”) urging shareholders to vote “FOR” the proposed
acquisition of the Company by affiliates of Searchlight Capital
Partners, L.P. (“Searchlight”) and British Columbia Investment
Management Corporation (“BCI”) (the “Proposed Transaction”). The
Special Meeting is scheduled to be held on January 31, 2024, and
shareholders of record as of December 13, 2023 will be entitled to
vote at the meeting.
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the full release here:
https://www.businesswire.com/news/home/20231217888743/en/
1. Unaffected stock price as of April 12,
2023, the last trading day prior to public announcement of the
non-binding proposal. 2. Peers include Frontier Communications,
Lumen, Cable One, Shentel, ATN International, WideOpenWest, Altice
USA and Charter Communications. 3. Calendar day volume-weighted
average prices as of April 12, 2023.
The Consolidated board of directors (the “Board”) believes the
offer of $4.70 per share represents the best risk-adjusted outcome
for shareholders, particularly in light of the significant risks
associated with Consolidated’s prospects as a public company with
limited access to capital. The Board urges shareholders to vote
“FOR” the Proposed Transaction. Highlights from the letter
include:
- The Proposed Transaction delivers a significant cash premium,
representing a compelling opportunity for shareholders to receive
an attractive and certain value for their investment.
- Even as peer stock prices have fallen, the purchase price
exceeds Consolidated’s stock price at every point over the last
year, even after the initial bid was made public, underscoring the
value-maximizing nature of the Proposed Transaction.
- The Proposed Transaction eliminates the ongoing uncertainty
from liquidity, funding and execution risks and transfers those
risks to Searchlight and BCI.
- The operating environment makes it difficult and costly for
Consolidated to execute its strategy, and Consolidated does not
have the liquidity to fund its future fiber builds at the pace
necessary to remain competitive.
- By slowing the Company’s fiber build pace, which it needs to do
in 2024 to preserve liquidity, competitors will have additional
time to build fiber in certain of Consolidated’s markets ahead of
the Company, creating a clear competitive disadvantage and an
impediment to future growth.
- The special committee established by the Board, composed of
independent and disinterested directors, undertook a robust and
thorough evaluation of all opportunities, including continuing as a
standalone company, and determined that the Proposed Transaction is
the most compelling – and only viable – path forward.
- Wildcat’s perspective is based on incomplete information, and a
misunderstanding of the risks and opportunities facing the Company.
Wildcat has based its views on hypothetical and highly uncertain
long-term scenarios for Consolidated that ignore the near-term
realities of operational risk, competitive intensity and financing
uncertainty that the Company faces today. Following Wildcat’s
misguided perspective would only endanger the value and certainty
that shareholders will receive if they support the Proposed
Transaction.
The full text of the letter mailed to shareholders follows:
YOUR VOTE IS IMPORTANT
PROTECT THE VALUE OF YOUR INVESTMENT BY
VOTING FOR THE TRANSACTION
TODAY
December 18, 2023
Dear Fellow Shareholders,
On January 31, 2024, Consolidated
Communications Holdings, Inc. (“Consolidated” or the “Company”)
will hold a special meeting of shareholders (the “Special Meeting”)
to consider the proposed acquisition of the Company by affiliates
of Searchlight Capital Partners, L.P. (“Searchlight”) and British
Columbia Investment Management Corporation (“BCI”).
The Consolidated board of directors (the
“Board”) believes this transaction, which will deliver $4.70 in
cash for each share you own, is fair and in the best interests of
the Company and its shareholders. The transaction represents a
compelling opportunity to receive an attractive and certain value
for your investment. The Board recommends that you vote "FOR" the
proposal to approve the Searchlight and BCI transaction (the
“Proposed Transaction”) on the enclosed proxy card today. Your
vote is important, regardless of the number of shares you own. Not
voting will have the same effect as voting against the
transaction.
In short, the Board believes this offer of
$4.70 per share represents the best risk-adjusted outcome for
shareholders, particularly in light of the significant risk
associated with Consolidated’s prospects as a standalone
business.
The Proposed Transaction Delivers
Financially Compelling and Certain Value to Consolidated
Shareholders
The $4.70 per share to be paid in cash is a
70% premium to the Company’s share price on the last full trading
day prior to the submission of Searchlight’s and BCI’s initial
non-binding proposal.1 This premium is being offered even as our
peers’ stock prices have fallen. Moreover, the purchase price
exceeds Consolidated’s stock price at every point over the last
year, even after the initial bid was made public, underscoring the
value-maximizing nature of the Proposed Transaction.
_______________________________
1 Unaffected stock price as of April 12,
2023, the last trading day prior to public announcement of the
non-binding proposal.
See Image 1.
The value of the Proposed Transaction is also
highly compelling when compared to the multiples secured in other
relevant transactions, as detailed below, and as compared to
similar precedent all cash transactions.
See Image 2.
Casting your vote is the best way for you
to secure this cash premium. Without sufficient shareholder
support, the Proposed Transaction will not be completed, risking a
steep drop in Consolidated’s share price potentially to well below
the pre-announcement price. Maximize the value of your investment
and vote FOR the Proposed Transaction today.
The Current Operating Environment Makes it
Difficult and Costly to Execute our Strategy to Effectively Compete
and Grow
To remain competitive, telecommunications
companies like Consolidated must upgrade their networks from
copper-based DSL to fiber. Consolidated’s copper-based DSL network
is costly to maintain and is generally incapable of delivering a
competitive residential or commercial broadband service. In fact,
on average, Consolidated only provides its subscribers with 25 Mbps
over its legacy copper DSL network. By comparison, the Company can
offer 1 Gbps and above (i.e., at least 40 times faster than the 25
Mbps currently being delivered to customers over its legacy copper
DSL network) over its fiber network. We believe this upgrade is
necessary to ensure the long-term sustainability of the Company.
Failure to execute, or even significantly slowing this upgrade,
jeopardizes the Company’s already precarious competitive position.
Consolidated is not alone in pursuing this fiber upgrade, as many
of its competitors are also making this transition.
The conversion we have undertaken is very
capital-intensive. Since 2021, when Consolidated first began
converting its network to fiber, cumulative capital expenditures
have totaled approximately $1.5 billion, and fiber now reaches
approximately 45% of our base. While we have accomplished much, we
are now attempting to complete our goal of bringing fiber to
approximately 70% of our network while combatting a deteriorating
financing and operating environment that is substantially different
from when our plan was originally developed. The challenges we face
in today’s uncertain market include:
- Accelerating industry-wide declines in voice and access
revenue, as consumers increasingly rely on their mobile phones
instead of their traditional landline ‘home phones’;
- Increased inflationary pressures that directly impact our
costs, resulting in higher than expected fiber construction and
installation costs and a lower return on our network
investment;
- Strong competition for broadband subscribers, in particular
from scaled nationwide providers, resulting in penetration levels
behind initial plans;
- A competitive and deflationary commercial and carrier market,
resulting in slower than anticipated growth and comparatively
unfavorable pricing; and
- Increased interest expense in light of higher interest
rates.
Owing to the challenges outlined above –
among others – our prior investments have not yielded the desired
results. The Company has responded to this new reality by trying to
generate additional liquidity, including through asset sales and
cost cutting, but these efforts have been insufficient to alleviate
the impact of market challenges on our business performance and
liquidity position. In short, Consolidated is unable to fund its
future fiber builds at the pace necessary to remain competitive and
continue to grow.
The Proposed Transaction eliminates the
ongoing uncertainty from liquidity, funding and execution risks and
transfers those risks to Searchlight and BCI.
Standalone Consolidated Does Not Have the
Liquidity to Fund its Growth Plan – the Proposed Transaction is
Critical to Realizing the Value of Your Investment
Because of Consolidated’s limited access to
capital and constrained liquidity position, we can no longer
execute on our original fiber upgrade plan. As a standalone
Company, we will be forced to significantly slow the pace of our
upgrade to roughly 45,000 – 75,000 passings per year, well below
our 2021 – 2023 average of more than 300,000 passings per year.
As a result, our build plan now has a completion date of 2029 –
three years after our original target. Given this delay in our
plan, competitors will have additional time to build fiber in
certain of our markets ahead of the Company, creating a clear
competitive disadvantage for us and an impediment to future
growth.
See Image 3.
Management’s updated standalone plan,
established in August 2023, anticipated that even with only 75,000
locations passed in 2024, the Company’s liquidity would shrink from
$231 million at the end of 2023, to $89 million at the end of 2024
and to a low point of only $11 million at the end of 2025.
Even with our significantly reduced build
plan in 2024 and 2025, the Company will have an extremely limited
liquidity cushion. A relatively modest miss on revenue or EBITDA,
an overspend on capex or unexpected movements in interest rates
could put the Company in a dire financial position.
Many of our competitors will also be
capitalizing on the upcoming Broadband Equity, Access, and
Deployment (BEAD) program, a government program that provides funds
to expand high-speed internet access. Utilizing these government
funds will require an upfront capital outlay from the Company. As a
standalone company, Consolidated may not have the liquidity to
meaningfully participate in the BEAD program, putting the Company
at a severe competitive disadvantage. Without capital, there is a
risk of our competitors winning subsidies and over-building our
network, thereby jeopardizing our competitive position.
Given the above, the Company will be in
the midst of a significant transformation for the next several
years. Again, transformation into a predominantly fiber business is
competitively critical, and many risks exist to get there
successfully, as the recent challenging operating environment has
underscored. Taking into account these risks, as well as the
protracted timeline of Consolidated’s FTTH transition, the Board believes this offer of $4.70 per share
represents the best risk-adjusted outcome for
shareholders.
Special Committee of Independent and
Disinterested Directors Undertook a Robust Evaluation of All
Opportunities to Maximize Value for All Shareholders
After receiving the initial proposal for the
Proposed Transaction from Searchlight and BCI on April 12, 2023,
the Board established a special committee composed of independent
and disinterested directors, advised by independent legal and
financial advisors (the “Special Committee”). The purpose of the
Special Committee was to evaluate the proposal as well as all
potential alternatives to maximize shareholder value.
It was well known to the market that the
Board was undertaking this evaluation. The Company issued a
press release acknowledging the proposal and noting that the
Special Committee would review the proposal along with any
alternative proposals or other strategic alternatives that may be
available.
Despite the publicity of the initial proposal
and the Company’s disclosure of its evaluation process and the
formation of the Special Committee, no inbound inquiries were
received expressing interest in an acquisition proposal.
Indeed, the Special Committee considered
the Searchlight and BCI proposal very seriously and conducted an
extremely thorough process, holding more than 35 formal meetings
over six months to discuss and evaluate the Proposed Transaction
and potential alternatives in order to ensure the Proposed
Transaction delivered the highest possible value. The
alternatives considered included additional asset divestitures and
various financing transactions to inject additional capital into
the Company. These were deemed not viable for a variety of reasons,
as outlined below:
- The difficulty of obtaining financing on acceptable terms in
today’s environment;
- Limited interest from buyers for other of our non-core assets
at attractive valuations and the likely timeframe to realize any
potential sale proceeds relative to the timing of our capital
needs;
- The likely significant dilution to shareholders; and
- Limitations imposed by Searchlight’s consent rights with
respect to debt incurrence and equity issuances.
The Special Committee determined that if
Consolidated were to remain a standalone company, it would yield
more downside risk than upside potential. The Board’s robust
evaluation underscores that the Proposed Transaction is the most
compelling path forward for Consolidated and its
shareholders.
The Special Committee negotiated an 18%
increase of the initial offer price, a significant benefit for
shareholders when considering the standalone option.
Wildcat is Attempting to Create a False
Narrative for Shareholders
We believe that Wildcat Capital Management,
LLC’s perspective is based on incomplete information, and a
misunderstanding of the risks and opportunities facing the Company.
Wildcat has based its views on hypothetical and highly uncertain
long-term scenarios for Consolidated that ignore the near-term
realities of operational risk, competitive intensity and financing
uncertainty that the Company faces today. The resulting perspective
is misguided and endangers the value and certainty that
shareholders will receive if they support the Proposed Transaction.
While Wildcat may dismiss the urgency of our liquidity constraints
and the negative impact on the Company’s value from slowing our
fiber build plan, the market certainly will not if this deal is
voted down.
Note that Wildcat has an unrealistic demand
for $14.00 per share, a 407% premium over the unaffected stock
price, based on their incorrect analysis. Consolidated’s share
price was only $2.76 on April 12, 2023, the day before the
non-binding offer was made public. Without the certainty of the
$4.70 per share offer, the Company’s share price will certainly
fall, most likely to levels below the $2.76 unaffected stock price,
given the well-known risks to the business. As a result,
significant and certain value for all shareholders will have been
destroyed.
Your Vote is Important – Not Voting is the
Same as Voting Against the Transaction
VOTE “FOR” THE PROPOSED TRANSACTION
TODAY
As a Consolidated shareholder, your choice is
clear: vote for significant, compelling and immediate value.
Your Board recommends that you vote
“FOR” the Merger Agreement
Proposal. Your vote is important, no matter how many shares you
own. Please vote today.
We thank you for your continued support.
Sincerely,
The Consolidated Communications Board of
Directors
The Board believes the offer of $4.70 per share represents the
best risk-adjusted outcome for shareholders, particularly in light
of the significant risks associated with Consolidated’s prospects
as a public company with limited access to capital. The Board urges
shareholders to vote “FOR” the Proposed Transaction.
Shareholders with questions or who require assistance voting
their shares should contact Consolidated’s proxy solicitor, Morrow
Sodali. Shareholders may call toll-free: (800) 662-5200 or +1 (203)
658-9400 (international) or email CNSL@info.morrowsodali.com.
Advisors
Rothschild & Co is acting as financial advisor to the
Special Committee and Cravath, Swaine & Moore LLP is acting as
its legal counsel. Latham & Watkins LLP is providing legal
counsel to Consolidated Communications.
About Consolidated Communications
Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) is
dedicated to moving people, businesses and communities forward by
delivering the most reliable fiber communications solutions.
Consumers, businesses and wireless and wireline carriers depend on
Consolidated for a wide range of high-speed internet, data, phone,
security, cloud and wholesale carrier solutions. With a network
spanning nearly 60,000 fiber route miles, Consolidated is a top 10
U.S. fiber provider, turning technology into solutions that are
backed by exceptional customer support.
Forward-Looking Statements
Certain statements in this communication are forward-looking
statements and are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements reflect, among other things, the
Company’s current expectations, plans, strategies and anticipated
financial results.
There are a number of risks, uncertainties and conditions that
may cause the Company’s actual results to differ materially from
those expressed or implied by these forward-looking statements,
including: (i) the risk that the Proposed Transaction may not be
completed in a timely manner or at all; (ii) the failure to
receive, on a timely basis or otherwise, the required approvals of
the Proposed Transaction by the Company’s stockholders; (iii) the
possibility that any or all of the various conditions to the
consummation of the Proposed Transaction may not be satisfied or
waived, including the failure to receive any required regulatory
approvals from any applicable governmental entities (or any
conditions, limitations or restrictions placed on such approvals);
(iv) the possibility that competing offers or acquisition proposals
for the Company will be made; (v) the occurrence of any event,
change or other circumstance that could give rise to the
termination of the definitive transaction agreement relating to the
Proposed Transaction, including in circumstances which would
require the Company to pay a termination fee; (vi) the effect of
the announcement or pendency of the Proposed Transaction on the
Company’s ability to attract, motivate or retain key executives and
employees, its ability to maintain relationships with its
customers, suppliers and other business counterparties, or its
operating results and business generally; (vii) risks related to
the Proposed Transaction diverting management’s attention from the
Company’s ongoing business operations; (viii) the amount of costs,
fees and expenses related to the Proposed Transaction; (ix) the
risk that the Company’s stock price may decline significantly if
the Proposed Transaction is not consummated; (x) the risk of
shareholder litigation in connection with the Proposed Transaction,
including resulting expense or delay; and (xi) (A) the risk factors
described in Part I, Item 1A of Risk Factors in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022 and
(B) the other risk factors identified from time to time in the
Company’s other filings with the SEC. Filings with the SEC are
available on the SEC’s website at http://www.sec.gov.
Many of these circumstances are beyond the Company’s ability to
control or predict. These forward-looking statements necessarily
involve assumptions on the Company's part. These forward-looking
statements generally are identified by the words “believe,”
“expect,” “anticipate,” “intend,” “plan,” “should,” “may,” “will,”
“would” or similar expressions. All forward-looking statements
attributable to the Company or persons acting on the Company’s
behalf are expressly qualified in their entirety by the cautionary
statements that appear throughout this communication. Furthermore,
undue reliance should not be placed on forward-looking statements,
which are based on the information currently available to the
Company and speak only as of the date they are made. The Company
disclaims any intention or obligation to update or revise publicly
any forward-looking statements.
Participants in the
Solicitation
The Company and its directors, executive officers and certain
other members of management and employees, under SEC rules, may be
deemed to be “participants” in the solicitation of proxies from
stockholders of the Company in connection with the Proposed
Transaction. Information about who may, under SEC rules, be
considered to be participants in the solicitation of the Company’s
stockholders in connection with the Proposed Transaction is set
forth in the definitive proxy statement filed with the SEC on
December 15, 2023 (the “Proxy Statement”) in connection with the
Proposed Transaction. To the extent holdings of the Company’s
securities have changed since the amounts set forth in such Proxy
Statement, such changes have been or will be reflected on Initial
Statements of Beneficial Ownership on Form 3 or Statements of
Change in Ownership on Form 4 filed with the SEC. Additional
information concerning the interests of the Company’s participants
in the solicitation, which may, in some cases, be different than
those of the Company’s stockholders generally, are set forth in the
Proxy Statement.
Additional Information and Where to Find
It
This communication may be deemed to be solicitation material in
respect of the Proposed Transaction. The Special Meeting will be
held on January 31, 2024 at 9:00 A.M. Central Time, at which
meeting the stockholders of the Company will be asked to consider
and vote on a proposal to adopt the merger agreement and approve
the Proposed Transaction. In connection with the Proposed
Transaction, the Company filed relevant materials with the SEC,
including the Proxy Statement. The Company intends to mail the
Proxy Statement and a proxy card on December 18, 2023 to each
stockholder of the Company entitled to vote at the Special Meeting.
In addition, the Company and certain affiliates of the Company
jointly filed an amended transaction statement on Schedule 13e-3
(the “Schedule 13e-3”). INVESTORS AND STOCKHOLDERS OF THE COMPANY
ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING THE PROXY STATEMENT AND THE SCHEDULE 13E-3, BECAUSE THEY
CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, SEARCHLIGHT AND
BCI AND THE PROPOSED TRANSACTION. Investors and stockholders of the
Company are able to obtain these documents free of charge from the
SEC’s website at www.sec.gov, or free of charge from the Company by
directing a request to the Company at 2116 South 17th Street,
Mattoon, IL 61938, Attention: Investor Relations or at tel: +1
(844) 909-2675.
No Offer or Solicitation
This communication is not intended to and shall not constitute
an offer to buy or sell or the solicitation of an offer to buy or
sell any securities, or a solicitation of any vote or approval, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231217888743/en/
Consolidated Communications Philip Kranz, Investor
Relations +1 217-238-8480 Philip.kranz@consolidated.com
Jennifer Spaude, Media Relations +1 507-386-3765
Jennifer.spaude@consolidated.com
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