On Monday, August 10^th, Shenandoah Telecommunications Company (NASDAQ: SHEN) announced that it will acquire NTELOS Holdings, Corp. (NASDAQ: NTLS), also known as nTelos, for approximately $586.00 million.  As part of the deal, certain assets will also be exchanged with Sprint (NYSE: S). The deal is subject to regulatory approval and is expected to close by the beginning of 2016.

Valuation Analysis and Deal Metrics

Transaction Facts

• ShenTel will finance the acquisition with a new credit facility. 
• nTelos shareholders will receive $9.25 per share in cash at closing.   
• Deal has already been approved by both company’s Board of Directors and is awaiting shareholder approval. 
• ShenTel’s affiliate agreement with Sprint will be revised.  
• nTelos spectrum licenses will be transferred to Sprint.
• 291,000 Sprint customers will become ShenTel Sprint affiliate customers in addition to the 281,500 customers ShenTel picks up from nTelos.
• ShenTel acquires $130 million net operating loss carryforwards, of which it expects to utilize all but $20 million.

Strategic Considerations

• Transaction overlaps areas of existing ShenTel cable, fiber, wireless and wireline networks.
• Overlapping should allow ShenTel to eliminate roughly 148 redundant cell sites, as well as leverage fiber and tower assets.
• Combination of a ShenTel's local market focus along with the Sprint brand could lead to an increase subscribers.
• Increased access and scale of Sprint’s shared services could help to increase operating efficiencies. 
• Sprint will be adding value to the transaction, partly due to $252.00 million in reduced affiliate agreement fees over the next 5 to 6 years. 

JSICA’s Take

• Transaction increases Shenandoah’s Mid-Atlantic footprint while providing ShenTel a regional area to deploy LTE services and utilize its fiber assets for backhaul. 
• Acquisition will approximately double ShenTel’s covered POPS, wireless subs, revenue, and OIBDA, before taking into account any potential synergies realized.
• Strengthens ShenTel’s affiliate relationship with Sprint by revising its current agreement and extending the term by five years to 2029.