Nov, 2001 : Choice One to Acquire Assets from FairPoint

📅 November 8, 2001 - Choice One Communications (choiceonecom.com), an integratedcommunications provider, yesterday announced the company has signed adefinitive agreement to acquire certain assets from FairPoint CommunicationsSolutions Corp (fairpoint.com). FairPoint Solutions was created in 1998 to pursue new market opportunities created by the deregulation of the local exchange markets.

The company offers a full suite of voice telecommunications services tosmall and medium sized businesses via facilities-based, total service resaleand UNE platform.
"This acquisition creates economies of scale in several existing markets andstrengthens our competitive foothold in the Northeast," said Steve Dubnik,Choice One's chairman and CEO. "Eighty-six percent of the existing lines inservice with FairPoint Solutions are in areas served by existing Choice Oneor FairPoint Solutions co-locations. As we consolidate common co-locationsand convert lines onto our own facilities, we expect to generate significantEBITDA margins."
"We will acquire certain co-location sites, a Siemens switch currently usedto serve some of FairPoint Solutions' existing access lines and otherswitching equipment that can be re-deployed in Choice One's network. Thiswill reduce our expected cash outlay for equipment purchases next year. Intotal, we expect this acquisition to add significantly to our revenue growthand to contribute positively to cash for 2002, through a combination ofpositive EBITDA and reduced capital expenditures."
Many of FairPoint Solutions' clients are in Choice One's existing markets inAlbany, New York; Syracuse, New York; Springfield, Massachusetts; Worcester,Massachusetts; and Manchester/Portsmouth, New Hampshire. FairPoint Solutionsalso has clients in 46 co-locations in areas not currently served by ChoiceOne. By acquiring these co- locations, Choice One will expand itsaddressable market opportunity by approximately 400,000 business accesslines and expand its service area into two new markets, Portland/Augusta,Maine and Erie/Western Pennsylvania. Choice One's Albany, New York marketwill also expand to include the Poughkeepsie/Hudson Valley region.
Upon closing, Choice One will have 30 markets and 520 co-locationsaddressing approximately 5.4 million business access lines. "Thistransaction is positive for FairPoint's investors and for FairPointSolutions' customers in these markets," said Gene B. Johnson, executive vicepresident and vice chairman of FairPoint. "Choice One is a strong competitorand has built a substantial presence in these overlap markets. Additionally,we believe that combining the assets of these two organizations will createvalue for FairPoint's investors. These FairPoint Solutions clients willcontinue to receive service, and should benefit from Choice One's broadcoverage area and substantial investment in these markets," added Dubnik.
The form of the definitive agreement is a purchase of assets. Considerationincludes 2.5 million shares of Choice One common stock, with issuance of upto 2 million additional shares contingent upon achievement of certainoperational metrics. Choice One will also pay $1.5 million in cash.
FairPoint will also have the right to appoint one member to Choice One'sboard of directors. The transaction is expected to close in the firstquarter of 2002 and has been approved by both parties' boards of directors.The transaction is contingent upon FairPoint Solutions obtaining consentfrom the participants in the company's credit facility and certain otherconditions, including regulatory approvals.