Tag Archives: definitive merger agreement

PAETEC Acquire Cavalier

PAETEC Holding Corp. (NASDAQ GS: PAET) today announced that it has signed a definitive merger agreement to acquire Cavalier Telephone Corporation in an all-cash $460 million transaction. Cavalier is a privately held company whose majority owner is M/C Venture Partners, a private equity firm based in Boston. The acquisition will add nearly 17,000 fiber-route miles to PAETEC’s existing service footprint, allowing the company to offer an alternative for last-mile connectivity to customers and reduce overall expenses through improved cost-structures and network grooming. The transaction will further solidify PAETEC as one of the largest competitive local communication service providers in the United States as measured by revenue, adjusted EBITDA* and free cash flow* for the twelve months ended June 30, 2010.

Cavalier’s wholly owned subsidiary, Intellifiber Networks, is one of the largest network providers in the nation with a high capacity fiber network spanning nearly 17,000 route miles and representing over $2 billion of investment. The expansive 12,262 route mile intercity network spans the Midwest and Eastern U.S., as well as 4,689 route miles throughout several existing PAETEC metro areas, allowing for broad connectivity options for customers. Intellifiber offers scalable network solutions for service provider, enterprise, and government customers including private networks, low latency routing, SONET services, wavelengths, Ethernet, and data options.

The combined company would have generated approximately $1.950 billion in revenue and $381 million in adjusted EBITDA for the twelve months ended June 30, 2010 on a pro forma basis, including $30 million in expected run-rate synergies in year two and annually thereafter. After the closing of this transaction, PAETEC expects to have a local presence in 86 of the top 100 Metropolitan Statistical Areas (MSAs) and a presence in 1,178 collocations, or an increase in collocations of 95% as a result of the acquisition.

“This planned acquisition of Cavalier fits our strategic plan to add both fiber assets and regional density to better serve our customers and realize increased network synergies, both in the local loop and long haul,” said Arunas A. Chesonis, chairman and chief executive officer of PAETEC. “Cavalier’s fiber infrastructure, network assets and corporate culture make it a perfect match for PAETEC and dramatically strengthen the company in the Eastern United States.”

“This is a major milestone in the Cavalier story. Our future has never looked brighter,”said Danny Bottoms, president & CEO of Cavalier. “This transaction will soon enable us to take advantage of a combined network and resources that are unmatched in the industry, and build upon a common culture that is singularly focused on the customer.”

* Neither adjusted EBITDA nor free cash flow is a measurement of financial performance under accounting principles generally accepted in the United States, or “GAAP.” Adjusted EBITDA, as defined by PAETEC for the periods presented, represents net loss before depreciation and amortization, interest expense, benefit from income taxes, stock-based compensation, debt extinguishment and related costs, sales and use tax settlement, gain on non-monetary transaction, and other non-operating income. Free cash flow, as defined by PAETEC, consists of adjusted EBITDA less capital expenditures (purchases of property and equipment). See the accompanying tables for a quantitative reconciliation of adjusted EBITDA to net loss, as net loss is calculated in accordance with GAAP.

Transaction Terms and Structure
Under the terms of the merger agreement, which was approved by the boards of directors of both companies, Cavalier will become an indirect wholly-owned subsidiary of PAETEC Holding Corp. Subsequent to the entry of Cavalier and PAETEC into the merger agreement, Cavalier received written consents evidencing the requisite approval and adoption of the merger agreement by Cavalier security holders in accordance with applicable law. Neither the merger agreement nor the merger is subject to the approval of PAETEC’s stockholders.

The transaction is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino AntiTrust Improvements Act of 1976, approvals by the FCC and state public service commissions in the states where the combined company will operate, and other customary closing conditions. The companies expect that the transaction will close within four to six months.

Concurrent with the execution of the merger agreement, PAETEC entered into a financing commitment letter with Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., Banc of America Bridge LLC, and Banc of America Securities LLC, pursuant to which these parties committed to provide $420 million in financing for this leverage neutral transaction. PAETEC’s ratio of net-debt to LTM adjusted EBITDA will continue at the relatively constant level of 3.4x. Cavalier’s outstanding net indebtedness of approximately $336 million will be repaid at closing.

“This transaction offers clear shareholder and customer benefits by increasing the scale of our business and creating a significant operating synergy opportunity without materially changing our capital structure,”said Keith Wilson, chief financial officer of PAETEC.

Company Leadership and Headquarters
After the closing, Arunas A. Chesonis will remain Chairman and Chief Executive Officer and Keith Wilson as Chief Financial Officer of the combined company. Current Cavalier President and CEO, Danny Bottoms, plans to join PAETEC’s executive team. PAETEC will continue to be headquartered in Fairport, New York, and will maintain Cavalier’s operations in Richmond, Virginia along with PAETEC’s significant regional centers, including Charlotte, North Carolina and Cedar Rapids, Iowa.

Additional information about the transaction will be contained in PAETEC’s Current Report on Form 8-K to be filed with the SEC.

Advisors
Deutsche Bank Securities Inc. and BofA Merrill Lynch are acting as financial advisors to PAETEC and Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates is acting as M&A counsel to PAETEC and Hogan Lovells US LLP is acting as counsel on PAETEC’s anticipated financing . Evercore Partners is acting as financial advisors and Edwards Angell Palmer & Dodge LLP is acting as legal advisor for Cavalier.

Conference Call
PAETEC will host a conference call with the investment community today at 9:00 a.m. ET. PAETEC Chairman and CEO Arunas A. Chesonis and Chief Financial Officer Keith Wilson will be participating, along with Cavalier Telephone President and CEO Danny Bottoms.

PAETEC McLeodUSA acquisition approved by FCC

PAETEC Holding Corp. (NASDAQ GS: PAET) announced that it and McLeodUSA Inc. have received Federal Communications Commission (FCC) approval required in connection with PAETEC’s proposed acquisition of McLeodUSA.

On September 17, 2007, PAETEC announced that it and McLeodUSA had entered into a definitive merger agreement.

As previously announced, the companies have received notice from the Federal Trade Commission that early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to their proposed transaction has been granted.

The transaction, which remains subject to other regulatory approvals and closing conditions, is expected to close in the first quarter of 2008.

About PAETEC
PAETEC (NASDAQ GS: PAET) is personalizing business communications for medium-sized and large businesses, enterprise organizations and institutions across the United States. We offer a comprehensive suite of voice, data, and IP services, as well as enterprise communications management software, network security solutions, CPE, and managed services. For more information, visit www.paetec.com.

About McLeodUSAMcLeodUSA provides managed IP-based communications services to small and medium-sized enterprises, and traditional circuit-switched telephony services to commercial customers in the Midwest, Rocky Mountain, Southwest and Northwest regions of the nation. McLeodUSA delivers a wide variety of broadband IP-based voice and data solutions, targeting primarily small and medium-sized enterprises and multilocation commercial customers. For more information, visit www.McLeodUSA.com.

Additional Information and Where to Find it
PAETEC Holding Corp. has filed with the SEC a registration statement on Form S-4 (File No. 333-146778), which contains a proxy statement/prospectus, subject to completion, regarding the proposed merger transaction, as well as other relevant documents concerning the transaction. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS AND THESE OTHER DOCUMENTS AS AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PAETEC, MCLEODUSA INCORPORATED AND THE PROPOSED TRANSACTION. A definitive proxy statement/prospectus will be sent to PAETEC’s stockholders seeking their approval of PAETEC’s issuance of shares in the transaction and to security holders of McLeodUSA Incorporated. Investors and security holders may obtain a free copy of the registration statement and proxy statement/prospectus (when available) and other documents filed by PAETEC with the SEC at the SEC’s web site at www.sec.gov. Free copies of PAETEC’s SEC filings are available on PAETEC’s web site at www.paetec.com and also may be obtained without charge by directing a request to PAETEC Holding Corp., One PAETEC Plaza, Fairport, New York 14450, Attn: Investor Relations.

PAETEC and its directors and executive officers may be deemed, under SEC rules, to be participants in the solicitation of proxies from PAETEC’s stockholders with respect to the proposed transaction. Information regarding PAETEC’s directors and executive officers is included in its annual report on Form 10-K filed with the SEC on April 2, 2007. More detailed information regarding the identity of potential participants and their direct or indirect interests in the transaction, by securities holdings or otherwise, will be set forth in the registration statement and proxy statement/prospectus and other documents to be filed with the SEC in connection with the proposed transaction.

3Com to be acquired

3Com Corporation (NASDAQ: COMS) today announced that it has signed a definitive merger agreement to be acquired by affiliates of Bain Capital Partners, LLC, a leading global private investment firm, for approximately $2.2 billion in cash.

Under the terms of the agreement, shareholders will receive $5.30 in cash for each share of 3Com common stock they hold. This represents a premium of approximately 44 percent over 3Com’s closing price of $3.68 on September 27, 2007.

The Board of Directors of 3Com has unanimously approved the merger agreement and has resolved to recommend that 3Com’s shareholders adopt the agreement.

“The 3Com Board of Directors and senior management team have thoroughly reviewed our strategic alternatives and have determined that the agreement with Bain Capital provides the best value for 3Com shareholders,” said Edgar Masri, 3Com president and chief executive officer. “We believe that this agreement better positions 3Com to establish itself as a global networking leader, which will benefit our employees, our customers and our partners.”

“As business becomes ever more global, companies need to enhance their technology infrastructure to compete more effectively in the broader economy,” said Jonathan Zhu, a Bain Capital Managing Director, based in Hong Kong. “3Com has a strong competitive position, and we believe there are significant opportunities to grow by acquiring customers and introducing new products. We look forward to working with the management team and the company’s strategic partners to seize the worldwide growth opportunity that exists for 3Com’s communications networking solutions.”

As part of the transaction, affiliates of Huawei Technologies will acquire a minority interest in the company and become a commercial and strategic partner of 3Com.

The transaction is expected to be completed by the first quarter of calendar year 2008, subject to receipt of 3Com shareholder approval, customary regulatory approvals and other customary closing conditions. Citigroup Global Markets Asia Limited, UBS AG, The Hongkong and Shanghai Banking Corporation Limited, ABN AMRO Bank N.V. and Bank of China (Hong Kong) Limited have provided firm financing commitments to Bain Capital Partners.

Goldman, Sachs & Co. is serving as exclusive financial advisor to 3Com and its Board of Directors, and provided a fairness opinion to the company in connection with the transaction. Wilson Sonsini Goodrich & Rosati acted as legal advisor to 3Com in connection with the transaction.

Citigroup Global Markets, Inc. and UBS Securities LLC are serving as financial advisors to Bain Capital. Ropes & Gray acted as legal advisor to Bain Capital in connection with the transaction.

Management will host a conference call and Webcast at 10:00 a.m. EDT, September 28, 2007, to discuss the transaction. To participate on the call, U.S. and international parties may dial 913-312-0963. Alternatively, interested parties may listen to the live broadcast of the call over the Internet at 3Com’s Investor Relations Web site (www.3com.com/investor) in the Earnings Webcast section. For those unable to participate on the live call, a 24-hour replay will be available starting at Noon EDT on September 28 by dialing 719-457-0820, passcode: 2412682.

About 3Com Corporation

3Com Corporation (NASDAQ: COMS) is a leading provider of secure, converged voice and data networking solutions for enterprises of all sizes. 3Com offers a broad line of innovative products backed by world class sales, service and support, which excel at delivering business value for its customers. 3Com also includes H3C Technologies Co., Limited (H3C), a China-based provider of network infrastructure products. H3C brings high-performance and cost-effective product development and manufacturing and a strong footprint in one of the world’s most dynamic markets. Through its TippingPoint division, 3Com is a leading provider of network-based intrusion prevention systems that deliver in-depth application protection, infrastructure protection, and performance protection. For further information, please visit www.3com.com, or the press site www.3com.com/pressbox.

About Bain Capital

Bain Capital, LLC (www.baincapital.com) is a global private investment firm that manages several pools of capital including private equity, venture capital, public equity and leveraged debt assets with more than $50 billion in assets under management. Since its inception in 1984, Bain Capital has made private equity investments and add-on acquisitions in over 250 companies in a variety of industries around the world, and has a team of almost 200 professionals dedicated to investing in and supporting its portfolio companies. Bain Capital has a long history of investing in technology businesses, including current investments in SunGard Data Systems, NXP, Sensata Technologies, FCI, Sun Telephone, Applied Systems and MEI Conlux. Headquartered in Boston, Bain Capital has offices in Hong Kong, Shanghai, Tokyo, New York, London and Munich.

Additional Information About the Transaction and Where to Find It

In connection with the proposed merger, 3Com will file a proxy statement with the Securities and Exchange Commission. Investors and security holders are advised to read the proxy statement when it becomes available because it will contain important information about 3Com and the proposed transaction. Investors and security holders may obtain a free copy of the proxy statement (when available) and other documents filed by 3Com at the Securities and Exchange Commission’s Web site at http://www.sec.gov. The proxy statement and such other documents may also be obtained for free from 3Com by directing such request to 3Com Corporation 350 Campus Drive, Marlborough, MA 01752-3064 Attention: Investor Relations; Telephone: 508-323-1198. Investors and security holders are urged to read the proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction.

3Com and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information concerning the interests of 3Com’s participants in the solicitation is set forth in 3Com’s proxy statements and Annual Reports on Form 10-K, previously filed with the Securities and Exchange Commission, and in the proxy statement relating to the merger when it becomes available.

Safe Harbor

This news release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including forward-looking statements regarding our proposed acquisition by Bain, and our business objectives. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including, without limitation, risks relating to: our ability to close the Bain transaction and to execute on our business plan and other risks detailed in the Company’s filings with the SEC, including those discussed in the Company’s annual report filed with the SEC on Form 10-K for the year ended June 1, 2007.

3Com Corporation does not intend, and disclaims any obligation, to update any forward-looking information contained in this release or with respect to the announcements described herein.

Copyright (C) 2007 3Com Corporation. 3Com, the 3Com logo and TippingPoint are registered trademarks of 3Com Corporation. All other company and product names may be trademarks of their respective holders.

CONTACT: Media & Investor Relations
3Com Corporation
John Vincenzo, 508-323-1260
[email protected]
or
For Bain Capital:
Stanton Crenshaw Communications
Alex Stanton, 212-780-0701
[email protected]

SOURCE: 3Com Corporation