On Thursday, October 1^st, Atlantic Tele-Network, Inc. (NASDAQ: ATNI) announced that it had acquired Caribbean Assets Holdings, LLC, the holding company for Innovative Communications Corporation (ICC) that provides cable TV, Internet and landline services primarily in the U.S. Virgin Islands.  ATN acquired the assets from the National Rural Utilities Cooperative Finance Corporation (CFC). 

Transaction Facts

• ATN will pay approximately $145.0 million for the transaction.
• The deal will be financed primarily with $85.0 million payable in cash and the option to finance the remaining $60.0 million of the purchase through a loan from an affiliate of CFC, the Rural Telephone Finance Cooperative (RTFC).
• Deal is expected to close in mid-2016.

Deal History

• In 2006, ICC was forced into involuntary bankruptcy after defaulting on RTFC loans; RTFC had loaned more than $500m to ICC between 1987 and 2001.
• CFC purchased ICC’s assets through bankruptcy in 2010.
• ICC majority shareholder Jeffrey Prosser appealed the sale to CFC to the Virgin Island Supreme Court, which upheld the sale to CFC in 2012.
• Prosser co-founded of ATN in 1987 with Cornelius Prior Jr., current chairman of the board for ATN.
• Prosser and Prior led ATN’s acquisition Virgin Island Telephone Company (Vitelco).
• Management differences at ATN led to a split of the company’s assets with Prosser retaining Vitelco (dba Innovative).

Financial and Strategic Considerations

• ATN is a provider of telecommunication services to rural, niche and other under-served markets and geographies in the United States, Bermuda and the Caribbean and owns and operates solar power systems in select locations across the United States. 
• Enables ATN to offer quad play--wireless, broadband, cable and wireline telephone—in U.S. Virgin Islands. 
• ICC’s company-wide operations revenue was approximately $100.0 million for its most recently completed fiscal year that ended May 31, 2015.

JSICA’s Take

• The EV/TTM Rev in this transaction represents an implied multiple of 1.5x, a discount to recently observed ILEC deals in the U.S.    
• Deal signals ATN’s desire to expand its operations in Caribbean after winding down is U.S. based wireless operations in recent years
• ATN subsequently announced that it had agreed to acquire 51% of Bermuda based KeyTech Limited providing entry into the Cayman Islands market

Introduction

On Wednesday, September 3^rd, Momentum Telecom announced its acquisition of Alteva (NYSE: ALTV).  Alteva’s main focus today has been on cloud-based UC on a BroadSoft platform. 

Transaction Facts

• Transaction is for approximately $28.7 million.
• As a result of the transaction, Alteva shareholders will receive $4.70 per common share, once the deal closes, which is expected to be during Q4 2015. 
• Transaction will give Momentum additional scale.

Strategic Considerations

• Deal increases Momentum’s user count to over 250,000.
• Improves the company’s marketing and sales initiatives.
• Delivers value in the form of support to existing and new customers.
• Bill Fox, President & CEO of Momentum commented on the transaction saying “The combined strengths of these two companies further enhance Momentum Telecom as a market leader in the VoIP and unified communications industry.”

JSICA’s Take

• Adds to the consolidation that has been occurring in the VoIP and unified communications industry.
• TTM Revenue as of June 30, 2015 was approximately $30.39m, which implies a revenue multiple of 0.9x.
• Cash flows from operations have been negative for several years. Alteva’s TTM OIBDA for the quarter ending June 30, 2015 was ($2.97 million).
• Alteva was formally Warwick Valley Telephone Company (WVTC)
• The transaction represents a 31% premium to Alteva’s closing share price on 9/2/2015.

Alteva Timeline

Frontier Communications Corporation (NASDAQ: FTR) announced on Wednesday, February 4^th that it had agreed to acquire wireline operations in California, Florida, and Texas that belong to Verizon Communications Inc. (NYSE: VZ).  The transaction is for approximately $10.54 billion and should benefit Frontier as it continues to create scale through M&A.

Valuation Analysis and Deal Metrics

Transaction Facts

• The transaction is being financed through $10.54 billion in cash.
• The acquisition includes Verizon’s wireline voice, broadband and video operations.
• Expected to close by the first half of 2016.

 Strategic Considerations

• Transaction will allow Frontier to double in size.
• Frontier expands its footprint, primarily in areas where it did not have a significant presence.
• Frontier’s experience with its newly acquired U-verse properties should benefit the integration of its FiOS markets. 
• 54% of the acquired network is FiOS enabled, repositioning Frontier’s business mix more heavily to fiber-based services.
• The acquired wireline operations generated revenue of approximately $5.7 billion for Verizon in 2014.
• Frontier’s lower cost structure is expected to reduce costs by $525 million in the first year after the close and by $700 million by year three post-close.

 JSICA’s Take

• A comparison of the multiples of priced transactions since the beginning of 2012, shows Frontier paid relatively lower multiples in the deal.
• Since the beginning of 2012, the average EV/LTM Revenue on priced transactions was approximately 1.9x, which is 0.1x higher than the FTR-VZ transaction multiple.
• Since the beginning of 2012, the average EV/LTM OIBDA was 6.0x, which is 1.5x higher than the multiple in the transaction.
• The average EV/P_ OIBDA since the beginning of 2012 was approximately 4.7x, which is 1.2x higher than the FTR-VZ transaction multiple.