Windstream Corporation’s (WIN) acquisition of Iowa Telecom (IWA) has been reportedly approved by Iowa’s shareholders. The transaction, which is now subject to approvals of federal and state regulators, is expected to close in mid-2010.
 
Windstream announced its acquisition of Iowa Telecom for $1.1 billion in November 2009. Iowa Telecom is a small local exchange carrier providing wireline services in rural Iowa, Minnesota, and Missouri. Per the agreement, Windstream will pay Iowa shareholders $261 million in cash ($7.90 for each share they own).
 
Windstream will also give 0.804 shares of its stock for each share of Iowa Telecom, equating to roughly $269 million. Additionally, the company will assume $598 million of Iowa debt. Windstream plans to finance the cash payment and repayment of debt it assumes from Iowa by raising debt. 
 
In February 2010, the companies entered a tentative settlement of the pending shareholder litigation concerning the merger. Some Iowa shareholders filed class action lawsuits challenging the deal.  
 
Windstream is one of the leading rural telecom carriers in the US with approximately 2.93 million fixed access lines, 1.05 million broadband connections and roughly 323,000 video subscribers.
 
However, Windstream remains challenged by the steady decline in its fixed-line telephone business given the rapid customer migration to cellular and cable TV services. Sustained access line erosion continues to weigh on the company’s top-line. Windstream is buying smaller rural carriers to expand its customer base and boost revenues.
 
Successful acquisition of Iowa Telecom will strengthen Windstream’s presence in the Upper Midwest and provide the company 256,000 fixed telephony access lines, 95,000 broadband Internet customers and 26,000 TV customers.
 
Moreover, the deal is expected to be accretive to Windstream’s cash flow and earnings in the first year following the acquisition. The carrier expects to achieve annual cost synergies of $35 million through savings on capital and operating expenses.
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