Combination Creates a Stronger, More Competitive Company with Extensive National Footprint
Spanning Approximately 145,000 Fiber Route Miles
Enables Expanded Products, Services and Enhanced Enterprise Solutions for Customers
Anticipated Annual Operating and Capital Expenditure Synergies of More than $125 Million
Representing a Net Present Value of Approximately $900 Million, or More than $4.70 per Windstream
Share and $3.85 per EarthLink Share
Expected to be Significantly Accretive to Adjusted Free Cash Flow in Year One,
Improving over Time as All Synergies are Realized
Companies to Host Conference Call at 7:30 a.m. CST / 8:30 a.m. EST Today
LITTLE ROCK, Ark. and ATLANTA , Nov. 07, 2016 (GLOBE NEWSWIRE) -- Windstream Holdings, Inc. (Nasdaq:WIN) (“Windstream”) and
EarthLink Holdings Corp. (Nasdaq:ELNK) (“EarthLink”) today announced that their boards of directors have unanimously approved a
definitive merger agreement under which Windstream and EarthLink will merge in an all-stock transaction valued at approximately
$1.1 billion, including debt.
Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each EarthLink
share owned. This ratio represents a 13 percent premium to the average exchange ratio of 0.721x over the month ended Nov. 3,
2016, the most recent unaffected trading day. Windstream expects to issue approximately 93 million shares of stock valued at
approximately $673 million, based on the company’s closing stock price on Nov. 4, 2016. Upon closing of the transaction, Windstream
shareholders will own approximately 51 percent and EarthLink shareholders will own approximately 49 percent of the combined
company.
The combined company will have increased scale and scope giving it the ability to leverage best practices across a broader
platform, and offer customers expanded products, services and enhanced enterprise solutions. The combination will result in an
extensive national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed
services, voice, internet and other value-added services. Customers will also benefit from combining Windstream’s scale in the
Enterprise segment and EarthLink’s successful launch of SD-WAN.
“The combination with EarthLink further advances Windstream’s strategy by creating a stronger, more competitive business to
serve our customers while increasing free cash flow and reducing leverage,” said Tony Thomas, president and chief executive officer
at Windstream. “With this transaction, we are combining two highly complementary organizations with closely aligned operating
strategies and business unit structures. We look forward to working with the talented EarthLink team to create significant benefits
and drive value for all of our stakeholders.”
“We are pleased to join forces with a company that shares our core values and operating philosophies, and whose strategy
complements our own,” said EarthLink Chief Executive Officer and President Joe Eazor. “In our work with Tony and his team, it’s
become clear that we are two companies on parallel paths. We’ve both made significant progress as evidenced by our improving
financial results and strengthening balance sheets. Now is the right time for us to come together. We look forward to working with
the Windstream team to better serve our customers in a world that is becoming more network-centric every day.”
Compelling Strategic and Financial Benefits
- Strengthens operating position through complementary networks and increased scale: The combined company will
have a robust nationwide network and deep footprint of 145,000 fiber route miles, including strategic routes located in the
Southeast and Northeast U.S. In addition, Windstream’s assets add significant value to EarthLink’s existing business by providing
cost savings and increased sales opportunities.
- Creates net present value of approximately $900 million from synergies, plus tax benefits: The companies
have identified more than $125 million in annual operating and capital expense synergies that are expected to be fully realized
within 36 months of closing. Approximately $50 million of these synergies are expected to be achieved within 12 months of closing
and an incremental $50 million are expected to be achieved within 24 months. The remaining $25 million are expected to be
realized within 36 months. The $125 million of synergies has a net present value of $900 million, representing value creation of
more than $4.70 per Windstream share and $3.85 per EarthLink share after accounting for integration costs. These synergies will
come primarily from the optimization of network and SG&A costs, the reduction of public company costs and the ability to
leverage best practices and combined operating scale to drive efficiency. In addition to the synergies from operations, the
combined company will benefit from EarthLink’s net operating losses, which are expected to have an estimated net present value of
$95 million at closing.
- Enhances balance sheet and increases free cash flow: Including run-rate synergies, on a pro forma basis for
the 12 months ended Sept. 30, 2016, the combined company would have a net leverage ratio of 3.2x. Further, the transaction will
be significantly accretive to Windstream’s adjusted free cash flow allowing greater financial flexibility for strategic network
investments and debt reduction while increasing dividend coverage.
Management Team, Board of Directors and Headquarters
After the transaction closes, Tony Thomas will serve as president and chief executive officer and Bob Gunderman will serve as
chief financial officer of the combined company. Key EarthLink management members are expected to join the combined company to
bring best-in-class talent and ensure a smooth integration.
Upon close, three of EarthLink’s existing directors will join the current Windstream board of directors, bringing the total
number of directors of the combined company’s board to twelve.
The combined company, which will retain the Windstream name, will be headquartered in Little Rock, Ark., and maintain offices in
key U.S. markets.
Dividend Practice and Debt Financing
Consistent with Windstream’s current dividend practice, the board of directors expects to maintain Windstream’s annual dividend
of $0.60 per share after the transaction closes, providing meaningful benefits to shareholders in the form of long-term capital
returns.
At the time of closing, Windstream intends to refinance EarthLink’s gross debt of approximately $436 million.
Approvals and Anticipated Closing
The transaction is expected to close in the first half of 2017. It is subject to the satisfaction of certain customary
conditions, including approval by the Federal Communications Commission, the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable state-level regulatory approvals and
approval by Windstream and EarthLink shareholders.
Advisers
J.P. Morgan is acting as lead financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal adviser to
Windstream in the transaction. Barclays also acted as financial adviser and delivered a fairness opinion to the Windstream board of
directors in conjunction with the transaction.
Foros is acting as lead financial adviser and has delivered a fairness opinion to EarthLink’s board of directors. Goldman Sachs
& Co. is also acting as financial adviser to EarthLink’s board of directors. Paul, Weiss, Rifkind, Wharton & Garrison LLP and
Troutman Sanders LLP are acting as legal advisers to EarthLink in the transaction.
Windstream and EarthLink Third Quarter 2016 Earnings Results
In separate press releases issued today, Windstream and EarthLink announced their respective results for the third quarter of
2016. In light of today’s transaction and third quarter earnings results announcements, Windstream and EarthLink have cancelled
their previously announced calls scheduled for Nov. 7, 2016, at 9:00 a.m. CST / 10:00 a.m. EST and 7:30 a.m. CST / 8:30 a.m. EST,
respectively.
Transaction Conference Call
Windstream and EarthLink will hold a joint conference call at 7:30 a.m. CST / 8:30 a.m. EST today to review the transaction as
well as both companies’ third quarter 2016 results.
Interested parties in the United States can access the call by dialing 1-877-374-3977, conference ID 99942553, fifteen minutes
prior to the start time. International participants should dial 1-253-237-1161.
A joint presentation will be available at www.windstream.com/investors and ir.earthlink.net.
Webcast Information
The conference call also will be streamed live over the companies' websites at www.windstream.com/investors and ir.earthlink.net. A replay of the webcast will be available on the companies’ websites beginning
at noon CST on Nov. 7 and ending at noon CST on Nov. 14.
To Access the Call Replay
A replay of the call will be available beginning at noon CST on Nov. 7 and ending at noon CST on Nov. 14. The replay can be
accessed by dialing 1-855-859-2056, conference ID 99942553. International participants should dial 1-404-537-3406.
About Windstream
Windstream Holdings, Inc. (NASDAQ:WIN), a FORTUNE 500 company, is a leading provider of advanced network communications and
technology solutions for consumers, businesses, enterprise organizations and wholesale customers across the U.S. Windstream offers
bundled services, including broadband, security solutions, voice and digital TV to consumers. The company also provides data, cloud
solutions, unified communications and managed services to business and enterprise clients. The company supplies core transport
solutions on a local and long-haul fiber network spanning approximately 129,000 miles. Additional information is available at
windstream.com. Please visit our newsroom at news.windstream.com or follow us on Twitter at @Windstream.
About EarthLink
EarthLink (EarthLink Holdings Corp.) (NASDAQ:ELNK) is a leading network services provider dedicated to
delivering great customer experiences in a cloud connected world. We help thousands of multi-location businesses securely establish
critical connections in the cloud. Our solutions for cloud and hybrid networking, security and compliance, and unified communications provide the cost-effective performance and agility to serve
customers anytime, anywhere, via any channel, or any device. We operate a nationwide network spanning 29,000+ fiber route miles,
with 90 metro fiber rings and secure data centers that provide ubiquitous data and voice IP coverage. To learn why thousands of
specialty retailers, restaurants, franchisors, financial institutions, healthcare providers, professional service firms, local
governments, residential consumers and other carriers choose to connect with us, visit us at www.earthlink.com, @earthlink, on LinkedIn and Google+.
Cautionary Statement Regarding Forward-Looking Statements
Windstream Holdings, Inc. and EarthLink Holdings Corp. claim the protection of the safe-harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or
phrases such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast” and other
words and terms of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual
future events and results to differ materially from those expressed in the forward-looking statements.
Forward-looking statements include, but are not limited to, 2016 guidance for revenue, adjusted OIBDAR and adjusted capital
expenditures, along with statements regarding adjusted free cash flow, cash interest and cash taxes; expectations regarding revenue
trends and improving margins in the business segments; network cost optimization; stability and growth in adjusted OIBDAR; for
Windstream, the anticipated benefits of Project Excel, of network investments pursuant to the Connect America Fund, and of enhanced
services available to customers; the ability to improve its debt profile and reduce interest costs; statements about the benefits
of the proposed merger with EarthLink, including future financial and operating results, future revenue, projected synergies in
operating and capital expenditures, the expected availability of net operating loss carryforwards to reduce future cash tax
expenses, net leverage, adjusted OIBDA/OIBDAR, and adjusted free cash flow; Windstream and EarthLink’s expected dividend policy
between the announcement of the transaction and proposed completion of the merger, and the dividend policy for the proposed
combined company after the merger; the expected timing of completion of the transaction that is contingent upon stockholder
approval of both companies and certain regulatory approvals, along with plans, objectives, expectations and intentions and other
statements that are not historical facts. These statements, along with other forward-looking statements regarding Windstream’s and
EarthLink’s overall business outlook, are based on estimates, projections, beliefs, and assumptions that Windstream believes is
reasonable but are not guarantees of future events, performance or results. Actual future events and results may differ materially
from those expressed in these forward-looking statements as a result of a number of important factors.
Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements
are set forth in Windstream’s and EarthLink’s respective filings with the Securities and Exchange Commission. These include risks
and uncertainties relating to: the ability to obtain the requisite Windstream and EarthLink stockholder approvals; the ability to
satisfy the conditions to consummation of the merger, including obtaining governmental and regulatory approvals required for the
merger; the risk that required governmental and regulatory approvals may delay the merger or result in the imposition of conditions
that could cause the parties to abandon the merger or materially impact the financial benefits of the merger; timing to consummate
the proposed merger; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other
synergies from the transaction may not be fully realized or may take longer to realize than expected; the anticipated future cash
requirements of the proposed combined company; disruption from the proposed transaction making it more difficult to maintain
relationships with customers, employees or suppliers; the diversion of management time on merger-related issues; dividend policy
changes for the proposed combined company; general worldwide economic conditions and related uncertainties; and the effect of
changes in governmental regulations. Neither Windstream nor EarthLink undertake any obligation to publicly update any
forward-looking statement, whether as a result of new information, future events or otherwise.
Additional Information And Where To Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation
of any vote or approval. In connection with the proposed merger between Windstream and EarthLink, Windstream will file with
the SEC a Registration Statement on Form S-4 that will include a joint proxy statement of Windstream and EarthLink that also
constitutes a prospectus of Windstream. Windstream and EarthLink will mail the joint proxy statement/prospectus to their
respective shareholders. Windstream and EarthLink urge investors and shareholders to read the joint proxy
statement/prospectus regarding the proposed merger when it becomes available, as well as other documents filed with the SEC,
because they will contain important information. You may obtain copies of all documents filed with the SEC regarding this
transaction, free of charge, at the SEC’s website (www.sec.gov). You may also obtain these documents, free of charge, from Windstream’s website
(www.windstream.com/investors). You may also obtain these documents, free of charge, from
EarthLink’s website (ir.earthlink.net) on the Investors page.
Participants In The Merger Solicitation
Windstream, EarthLink and their respective directors, executive officers and certain other members of management and employees
may be soliciting proxies from Windstream and EarthLink shareholders in favor of the merger and related matters. Information
regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the companies’
shareholders in connection with the proposed merger will be set forth in the joint proxy statement/prospectus when it is filed with
the SEC. You can find information about Windstream’s executive officers and directors in its definitive proxy statement filed with
the SEC on April 1, 2016. You can find information about EarthLink’s executive officers and directors in its definitive proxy
statement filed with the SEC on March 15, 2016. Additional information about Windstream’s executive officers and directors and
EarthLink’s executive officers and directors can be found in the above-referenced Registration Statement on Form S-4 when it
becomes available. You can obtain free copies of these documents from the companies using the website information above.
Regulation G Disclaimer
This presentation includes certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to
the most directly comparable GAAP financial measures are available on our website at www.windstream.com/investors.
Net present value of synergies referred to herein assumes integration costs to achieve synergies of $125 million; assumes a
discount rate of 8.5% and a tax rate of 37%. Per share calculation assumes Windstream pro forma ownership of 51% and 97
million shares outstanding, and EarthLink pro forma ownership of 49% and existing shares outstanding of 114 million.
Contacts
Windstream Media
Contact:
EarthLink Media Contact:
David Avery,
501-748-5876
Jeff Crow, 404-748-7861
david.avery@windstream.com
jeffrey.crow@elnk.com
Joele Frank, Wilkinson Brimmer
Katcher
Sard Verbinnen & Co
James Golden/Daniel Moore/Nicholas Leasure Drew Brown/Robin
Weinberg, 212-687-8080
212-355-4449
dbrown@sardverb.com
rweinberg@sardverb.com
Windstream Investor
Contact:
EarthLink Investor Contact:
Mary Michaels,
501-748-7578
Trey Huffman, 404-748-6219
mary.michaels@windstream.com
huffmanal@elnk.com
