SHEN - Shenandoah Telecommunications Company to Acquire Horizon Telcom | Benzinga

EDINBURG, Va., Oct. 24, 2023 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company ("Shentel" or the "Company") (NASDAQ:SHEN) announced today it has entered into a definitive agreement to acquire 100% of the equity interests in Horizon Acquisition Parent LLC ("Horizon" or "Horizon Telcom") for $385 million (the "Transaction"). Consideration will consist of $305 million in cash and $80 million of Shentel common stock.

Horizon is a leading commercial fiber provider in Ohio and adjacent states serving national wireless providers, carriers, enterprises, and government, education and healthcare customers. Horizon's unique 7,200 route-mile fiber network is the largest and most dense network across its footprint with over 9,000 on-net locations. Approximately 64% of Horizon's revenues are derived from their commercial customers. Based in Chillicothe, Ohio, Horizon was founded in 1895 as the incumbent local exchange carrier ("ILEC") in Ross County, Ohio and rapidly expanded its fiber network over the past 14 years. Most recently, Horizon has pursued a strategy of investing in Fiber-to-the-Home ("FTTH") in tier 3 & 4 markets in Ohio and currently passes 14,000 homes and businesses with fiber in its ILEC market and 18,000 homes in new, greenfield markets adjacent to its commercial fiber network.

"The acquisition of Horizon is a transformative transaction that we believe will allow us to accelerate our Fiber First strategy by doubling the size of our commercial fiber business and creating a new beachhead for our Glo Fiber business. We now expect to pass 150,000 additional homes with fiber in greenfield markets, targeting 600,000 total passings by the end of 2026," said Shentel's President and CEO, Christopher E. French. "We are excited to combine Horizon's robust fiber network and commercial fiber business with our 9,000 route-mile, multi-state fiber network and accelerate our Glo Fiber expansion. Horizon and Shentel share a similar history and a passion for outstanding local customer service while providing state-of-the-art technologies. We believe our teams' core competencies will complement one another, translating to a stronger combined business."

Horizon CEO, Jim Capuano, added "We are proud of the success Horizon has experienced in partnership with Novacap and GCM Grosvenor over the past five years building a leading broadband company in Ohio. The transaction with Shentel creates an exciting opportunity for our customers and the communities we serve to continue to receive best-in-quality broadband service and an opportunity for our employees to continue to be integral contributors to a leading super-regional provider."

Shentel will host a conference call and webcast at 8:30 A.M. ET on Wednesday, October 25, 2023. The webcast and related materials will be available on Shentel's Investor Relations website at https://investor.shentel.com/.

For Analysts, please register to dial-in at this link.

Financial Information

• Horizon generated $64.7 million in revenues, $12.0 million in net loss and $19.0 million in Horizon Adjusted EBITDA in 2022.^1,2
• Shentel anticipates realizing $10 million in estimated annual run-rate synergies³ within 18 months of closing the transaction.
• Shentel anticipates realizing $16 million in present value of tax benefits from utilization of $68 million in Horizon Net Operating Loss and $18 million in deferred interest deduction carryforwards.
• Horizon has been awarded over $57 million in grants from the Ohio Broadband Authority and NTIA ("Government Grant Projects") to construct fiber to 2,500 unserved homes, expand its middle-mile fiber network across eight underserved counties in Ohio, and increase its network backbone capacity up to 400 Gbps. These projects are expected to be completed by 2028.

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^{1 The financial results for Horizon in this press release have been derived from audited financial statements prepared by Horizon, without adjustment to conform to the accounting principles and methodologies used by Shentel. The accounting policies and methodologies used by Horizon differ in certain respects from those used by Shentel, but Shentel does not believe these differences are material.
2 A reconciliation of Horizon Net Income, the most directly comparable financial measure calculated and reported in accordance with GAAP, to Horizon Adjusted EBITDA and Horizon Adjusted EBITDA net of synergies can be found at the end of this press release under the heading "Non-GAAP Financial Measure."
3 Includes $9.6 million in run-rate operating expense synergies and $0.6 million in capex synergies.}

Transaction Details

• The Transaction is subject to certain regulatory approvals and other customary closing conditions and is expected to close in the first half of 2024.
• The purchase price, less present value of tax benefits, represents:
  
  • 12.9x 2022 Horizon Adjusted EBITDA multiple net of synergies²
  • Approximately $51,000 per fiber route mile

Financing

• Shentel intends to fund the Transaction with a combination of existing cash resources, revolving credit facility capacity and an amended and upsized credit facility. The Company has received $275 million in financing commitments from CoBank, Bank of America, Citizens Bank, N.A., and Fifth Third Bank, N.A..
• GCM Grosvenor ("GCM"), a selling unit holder of Horizon, will exchange its equity interest in Horizon for 4.08 million shares of Shentel common stock with an aggregate value of $80 million based on a reference price of $19.60⁴ resulting in GCM owning approximately 7% of Shentel's fully diluted common shares after the transaction is closed.
• Shentel has entered into a 7%⁵ Participating Exchangeable Perpetual Preferred Stock ("Preferred Stock") investment agreement with Energy Capital Partners ("ECP"), an existing Shentel shareholder and long-time infrastructure investor, to provide $81 million of growth capital to fund the FTTH network expansion, the Government Grant Projects and general corporate purposes. The dividend can be paid in cash or in-kind at the option of the Company. The Preferred Stock can be exchanged for Shentel common stock at an exchange price of $24.50, a 25% premium to the reference price of $19.60⁴, under certain conditions as outlined in the investment agreement. This financing is expected to close in conjunction with the Transaction.
• The Company ...

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