ONEONTA, AL, Aug. 7 /CNW/ - Otelco Inc. (NASDAQ: OTT; TSX: OTT.un) today
announced it has entered into a Stock Purchase Agreement (the "Agreement")
with Country Road Communications LLC. Country Road is a leading provider of
advanced telecommunications services to the communities it serves which are
located in Maine, Massachusetts and West Virginia. Pursuant to the Agreement,
Otelco will acquire 100% of the outstanding capital stock of Pine Tree
Holdings, Inc., Granby Holdings, Inc. and War Holdings, Inc. from Country
Road. The consideration for the purchase is $101,329,000, payable in cash at
closing, subject to adjustments as provided in the Agreement.
The acquisition of the Country Road subsidiaries will add more than
23,000 Rural Local Exchange Carrier (RLEC) voice and data access lines; 6,000
retail Competitive Local Exchange Carrier (CLEC) voice and data access lines;
and 82,000 wholesale CLEC connections.
"Country Road is a great complement to our existing rural telephone and
CLEC operations in Maine and is an important step in our expansion in the New
England region," said Mike Weaver, President and CEO of Otelco. "Country
Road's commitment to providing excellent customer service and delivering high
quality telecommunications and Internet services to residential and business
customers is consistent with Otelco's commitment to its customers.
"From a strategic perspective, the acquisition of Country Road adds
attractive markets in New England and strengthens our existing operations in
the region. In addition, it reaffirms to investors that we continue to pursue
a disciplined acquisition strategy, focusing on cash accretive opportunities.
The completion of this transaction will increase our free cash flow and
improve our payout ratio which will enhance our ability to maintain our
dividend while also creating additional excess cash flow to support our
growth," added Weaver.
"Country Road's operations, which consist of four RLECs and one CLEC, are
similar to Otelco's existing operations in Maine and represent a well balanced
business mix, with the revenue stability provided by the RLECs and the
attractive growth opportunities provided by the CLEC," noted Weaver.
"Finally, the combination of Country Road's infrastructure with the
extensive fiber network of our current Maine operation creates a more diverse
and robust network platform for our existing customers and provides additional
opportunities for expanding our services to new markets and increasing our
penetration in the markets we currently serve," Weave commented.
Country Road Business Overview:
Country Road provides telecommunications services through the following
- The operations of Pine Tree Telephone and Saco River Telephone
together form Country Road's Maine RLEC cluster. Pine Tree's
franchise area is comprised of approximately 120 square miles located
25 miles from Portland, serving six towns from three exchanges in
Gray, West Gray and New Gloucester. Saco River's franchise area is
comprised of approximately 110 square miles located approximately 17
miles from Portland, serving seven towns from three exchanges in Bar
Mills, Waterboro and West Buxton.
- CRC Communications of Maine, operating under the Pine Tree Networks
brand, is a CLEC and provides integrated communications services
directly to small and medium enterprises and, on a wholesale basis,
to other multi-system operators in Maine.
- Country Road's Granby Holdings subsidiary operates as an RLEC and is
located approximately 12 miles from Springfield, Massachusetts,
serving the town of Granby (approximately 28 square miles) from one
- Country Road's War Telephone Company subsidiary operates as an RLEC
and is approximately 25 miles from Bluefield, West Virginia, serving
the town of War from one exchange.
Otelco intends to finance the transaction with additional senior debt and
has obtained a commitment for the financing from a group of lenders led by GE
Commercial Finance's Media, Communications and Entertainment business. In July
2007, Otelco sold 3,000,000 additional Income Deposit Securities, using the
proceeds to reduce senior debt in preparation for additional acquisition
Consummation of the proposed transaction is subject to customary closing
conditions, regulatory approvals and funding of the senior debt commitment.
The transaction has been approved by the Boards of Directors of both companies
and is expected to close in the fourth quarter of 2008.
Oppenheimer & Co. Inc. acted as the exclusive financial advisor to Otelco
Inc., and Miller Buckfire & Co., LLC acted as the exclusive financial advisor
to Country Road Communications, LLC.
Otelco will hold a conference call today August 7, 2008 at 2:30 p.m.
(Eastern Time) to further discuss this transaction. To listen to the call,
participants should dial 303-262-2075 and ask for the Otelco call 10 minutes
prior to the start of the call. Investors, analysts and the general public
will also have the opportunity to listen to the conference call free over the
Internet by visiting the Company's Web site at www.OtelcoInc.com or
www.earnings.com. To listen to the live call online, please visit the Web site
at least 15 minutes early to register, download and install any necessary
audio software. For those who cannot listen to the live Web cast, a replay of
the Web cast will be available on the Company's website at www.OtelcoInc.com
or www.earnings.com for 30 days. A one-week telephonic replay may also be
accessed by calling 303-590-3000 and using the passcode 11118472 followed by
the number sign.
Otelco Inc., headquartered in Oneonta, Alabama, provides wireline
telephone services in Alabama, Maine and Missouri. The Company's services
include local and long distance telephone, network access, transport, digital
high-speed data and dial-up Internet access, cable television and other
telephone related services. With more than 69,000 voice and data access lines,
which are collectively referred to as access line equivalents, Otelco is among
the top 40 largest local exchange carriers in the United States based on
number of access lines. Otelco operates six incumbent telephone companies
serving rural markets, or rural local exchange carriers, each of which can
trace its history as a local telecommunications provider as far back as the
early 1900s. It also provides competitive telecommunications services through
several subsidiaries. For more information, visit the Company's web site at
FORWARD LOOKING STATEMENTS
Statements in this press release that are not statements of historical or
current fact constitute forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties, and other unknown
factors that could affect the timing of the acquisition or the satisfaction of
the conditions to the acquisition, or cause the actual results of the Company
to be materially different from the historical results or from any future
results expressed or implied by such forward-looking statements. In addition
to statements which explicitly describe such risks and uncertainties, readers
are urged to consider statements labeled with the terms "believes", "belief,"
"expects," 'intends," "anticipates," "plans," or similar terms to be uncertain
and forward-looking. The forward-looking statements contained herein are also
subject generally to other risks and uncertainties that are described from
time to time in the Company's filings with the Securities and Exchange
For further information:
For further information: Curtis Garner, Chief Financial Officer, Otelco
Inc., (205) 625-3571, Curtis@otelcotel.com