Consolidated Communications shareholder Wildcat opposes $3.1 bln take-private deal

Consolidated Communications Holdings

03/11/2023 11:30

By Anirban Sen
       NEW YORK, Nov 3 (Reuters) - Wildcat Capital Management,
a top shareholder in Consolidated Communications Holdings
 CNSL.O , said on Friday it plans to vote against its $3.1
billion takeover by an investor consortium, as it undervalues
the broadband services provider. 
    Wildcat, which owns about 3 million shares and is the
fifth-largest shareholder in Consolidated Communications, said
in a letter to the Mattoon, Illinois-based company's board that
it believes a value of at least $4 billion, including debt,
would be meritied. This would represent a nearly 30% premium to
the deal price of $4.70 per share. 
    "Wildcat continues to believe in the strategic value of the
assets assembled by CNSL and the Company's strong potential as a
standalone entity, and called for CNSL to terminate the
agreement if a higher price cannot be negotiated," Tom McConnon,
head of Wildcat's public equities arm, wrote in the letter, a
copy of which Reuters has seen.
    In October, Consolidated Communications agreed to be bought
by an investor group comprising Searchlight Capital Partners And
British Columbia Investment Management Corp, months after the
group had first submitted an offer to buy the company. Reuters
reported in July that Wildcat asked Consolidated Communications
to reject the offer. 
    Consolidated Communications did not immediately respond to a
request for comment.
    Wildcat argued that mature fiber and cable operators have
historically been valued at 10 to 15 times earnings before
interest, taxes, depreciation and amortization (EBITDA) by
acquirers, whereas Consolidated Communications' take-private
deal valued the company at about six times of cash flow.
    Wildcat also argued the debt market for fiber assets has
become more attractive this year and mature fiber businesses can
be levered to about 8.5 times annual revenue growth rates,
adding that Frontier Communications' recent debt deal support
its valuation estimates of nearly $4 billion, or $10.70 per
share.
    "We believe that the vast majority of CNSL's normalized
EBITDA is residential fiber-to-the-home or commercial fiber, not
legacy voice," McConnon said. 

 (Reporting by Anirban Sen in New York; Editing by Rashmi Aich)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
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