Consolidated Communications Holdings Inc. explains acquisition of North Pittsburgh Systems
Before the start of Monday’s trading, Consolidated Communications Holdings Inc. (Nasdaq: CNSL) announced it is acquiring North Pittsburgh Systems (Nasdaq: NPSI) for $375 million in a cash and stock deal. On a midday conference call, Consolidated’s management explained their reasons for buying North Pittsburgh, much of them having to do with cash flow.
“Most importantly, it improves our dividend payout ratio through operating efficiencies and driving annual cash synergies,” Consolidated’s CEO Bob Currey said on the call. “It’s cash flow accretive in the first full year of operations. This is a good transaction for Consolidated.”
Currey said North Pittsburgh’s customers and 300-mile fiber optic network were attractive. As of March 31, North Pittsburgh served 127,000 telephone customers and 16,300 Internet customers, Currey said. The quality of North Pittsburgh’s network is industry leading, he said. Currey said more than 95% of North Pittsburgh’s local loops – copper wires that run to subscribers and back to the company’s offices – are less than 5,000 feet. Because of the North Pittsburgh’s existing network, he said Consolidated will be able to roll out IPTV, the company’s broadband video technology.
“This is a solid company with a high priority for their network,” Currey said. “This is as good as our network if not better.”
Consolidated Communications is Mattoon, Ill.-based telecommunications holding company. The company specializes in residential and business communications services to customers in Illinois and Texas. Consolidated also provides telephone service to county jails and state prisons.
North Pittsburgh Systems is a holding company that owns a number of Western Pennsylvania-based telecommunications companies. North Pittsburgh and its subsidiaries provide telephone and Internet services.
Consolidated expects to see synergistic improvements by the end of the year, Currey said. North Pittsburgh has already implemented cost cutting initiatives, he said.
“We have never been better positioned operationally or financially to grow through acquisition,” Currey said.
In midday trading, shares of Consolidated Communications were down $0.53, or 2.35%, at $22.07.
