Charlotte-based FairPoint Communications announced Monday it is being purchased for $1.5 billion by Illinois-based Consolidated Communications in a move that follows an investor push to sell the company.
The combined company will keep the Consolidated Communications name, and it will be headquartered in Mattoon, Ill. Consolidated CEO Bob Udell will serve as president and CEO of the combined company, and one director from the FairPoint board will join Consolidated’s board of directors, the two companies said in a statement.
FairPoint employs 2,600 across the U.S., including about 40 in Charlotte, a spokeswoman said. It’s too early to say what impact the deal could have on employment, since the integration process is just beginning, the spokeswoman added.
The deal is expected to close by mid-2017.
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FairPoint provides phone and Internet service in 17 states, with its largest network in northern New England. This past summer, FairPoint’s largest investor, New York-based Maglan Capital, said the company needed to consider selling itself because it had failed to maximize shareholder value. In August, Maglan asked for a board seat and the resignation of four directors.
FairPoint’s shares closed up nearly 11 percent Monday at $18.85.
The two companies said the deal strengthens FairPoint’s dividend payout ratio and will improve its balance sheet. Under the deal, Consolidated will assume FairPoint’s debt, which totaled approximately $887 million at the end of September.
As part of the deal, FairPoint shareholders will receive 0.73 shares of Consolidated Communications common stock for each share of FairPoint common stock they own, the two companies said. After the deal closes, Consolidated shareholders will own about 71.3 percent of the combined company; FairPoint shareholders will own 28.7 percent.
The deal is expected to generate annual cost savings of about $55 million, which is projected to be completed within two years after the merger is complete.
“FairPoint and Consolidated Communications create a highly competitive business and broadband company with a superior network to deliver a best-in-class experience to carrier, commercial and consumer customers,” said Paul Sunu, CEO of FairPoint.