UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of
Report (Date of earliest event reported):
December
18, 2006
CenturyTel,
Inc.
(Exact
name of registrant as specified in its charter)
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Louisiana
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1-7784
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72-0651161
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(State
or other jurisdiction of
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(Commission
File Number)
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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100
CenturyTel Drive, Monroe, Louisiana 71203
(Address
of principal executive offices) (Zip Code)
Registrant's
telephone number, including area code: (318) 388-9000
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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[
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.
14a-12)
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[
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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[
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
1.01
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Entry
Into a Material Definitive
Agreement
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On
December 17, 2006, we entered into a stock purchase agreement with Madison
River
Communications Corp. (“MRCC”) and its owner, Madison River Telephone Company,
LLC. Under this agreement, we agreed to purchase all of the capital stock
of
MRCC in exchange for $830 million cash less
MRCC’s
net indebtedness on the transaction’s closing date (which was approximately $494
million at September 30, 2006), subject to adjustment at closing for changes
in
MRCC’s working capital between September 30, 2006 and closing.
Consummation
of the transaction is subject to (i) the receipt of various governmental
approvals, including approvals from the Federal Communications Commission
and the public utility commissions of Alabama, Georgia, Illinois, North
Carolina, Florida and Louisiana, (ii) compliance with the notification and
waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and (iii) various other customary closing conditions. We currently
expect the transaction to be completed in the second quarter of
2007.
The
parties to the stock purchase agreement have made customary representations,
warranties and covenants, including commitments of MRCC and its owner not
to solicit or pursue alternative transactions and provisions that permit
the
parties to terminate the agreement under certain limited
circumstances.
For
additional information, see Item 8.01 below and the exhibits referred to
therein.
On
December 18, 2006, (i) we announced that we had entered into the stock purchase
agreement described above by press release, a copy of which is attached hereto
as Exhibit 99.1, and (ii) we made a presentation to investors and analysts
using
materials posted to our website on such date, copies of which are attached
hereto as Exhibit 99.2. Exhibits 99.1 and 99.2 are both incorporated by
reference herein in their entirety, including various cautionary statements
that
modify our forward-looking statements made or incorporated herein.
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Item
9.01
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Financial
Statements and Exhibits
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(d)
Exhibits
| 99.1 |
Press
release announcing entry into definitive stock purchase agreement
to
acquire Madison River Communications
Corp.
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99.2
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Presentation
to
investors and analysts regarding
above.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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CENTURYTEL,
INC.
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Dated:
December 20, 2006
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By:
/s/
Neil A. Sweasy
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Neil
A. Sweasy
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Vice
President and
Controller
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Exhibit
99.1
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FOR
IMMEDIATE RELEASE
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FOR
MORE INFORMATION CONTACT:
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December
18, 2006
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Media:
Patricia Cameron 318.388.9674
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patricia.cameron@centurytel.com
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Investors:
Tony Davis 318.388.9525
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tony.davis@centurytel.com
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CenturyTel
to Acquire Madison River for $830 million
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Acquisition
of
176,000 rural access lines with 99% broadband coverage and 30% high
speed
Internet penetration
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Accretive
to free cash flow per share in the first year, before
synergies
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Expands
CenturyTel’s access line base by
8%
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Maintains
CenturyTel’s operational, financial and strategic
flexibility
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| · |
Continued
commitment to share repurchase
plan
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MONROE,
LA. - CenturyTel, Inc. (“CenturyTel” or the “Company”) (NYSE Symbol: CTL)
announced today that it has entered into a definitive agreement to acquire
all
of the outstanding stock of Madison River Communications Corp. (“Madison River”)
for $830 million in
a
combination of cash and the assumption of debt.
The
acquisition is expected to close in the second quarter of 2007, subject to
the
satisfaction of certain customary conditions, including necessary approvals
from
federal and state regulators. The final purchase price is subject to certain
customary adjustments which are not expected to be material.
CenturyTel
intends to finance the acquisition with debt and cash generated from operations.
The Company also expects to complete the remainder of its current $1 billion
share repurchase program by mid-year 2007.
CenturyTel’s
balance sheet will remain strong following the transaction, with a pro forma
net
debt to last twelve months ended September 30, 2006 (“LTM”) EBITDA ratio of
approximately 2.6x, before anticipated synergies. On a pro forma basis, the
Company will have approximately 2.3 million access lines and 390,000 high-speed
Internet subscribers.
Strategic
Rationale
With
this
acquisition, CenturyTel adds attractive markets with good demographics and
growth prospects in Alabama, Georgia, Illinois and North Carolina. Madison
River’s high-quality network is 99% broadband-enabled and includes a 2,400 route
mile fiber network that is complementary to CenturyTel’s existing
operations.
Once
this
acquisition is fully integrated, CenturyTel estimates it will achieve annual
cost synergies of approximately $17 million.
“We
are
pleased to announce the acquisition of Madison River. Under Stephen
Vanderwoude’s and Paul Sunu’s leadership, Madison River has built a great
communications company. Through efficient investment in their network and a
grass-roots approach to their customer base, they have achieved virtually
ubiquitous broadband enablement and strong high-speed Internet penetration,”
said Glen F. Post, III, chairman and chief executive officer of CenturyTel.
“This transaction fits CenturyTel’s acquisition strategy and permits us to
continue our share repurchase initiative while maintaining operational,
financial and strategic flexibility.”
Financial
Summary
Madison
River generated $189 million of revenue, $99 million of EBITDA and $35 million
of leveraged free cash flow, before anticipated synergies, in the twelve months
ended September 30, 2006. The purchase price represents 9.6x and 7.4x Madison
River’s LTM free cash flow before and after anticipated synergies, respectively,
and 8.4x and 7.2x LTM EBITDA before and after anticipated synergies,
respectively.
CenturyTel
estimates the transaction will be approximately 4%
accretive
to free cash flow per share, before synergies. After synergies, the transaction
is estimated to be approximately 6% accretive to free cash flow per
share.
Additional
Information
Lehman
Brothers Inc. acted as exclusive financial advisor to CenturyTel on the
transaction. Goldman Sachs & Co. and Merrill Lynch & Co. acted as
financial advisors to Madison River.
This
release includes certain non-GAAP financial measures. Reconciliation of non-GAAP
financial measures discussed above or that may be discussed during the
conference call described below will be available in the Investor Relations
portion of CenturyTel’s Web site at www.centurytel.com.
Investors are urged to consider these non-GAAP measures in addition to, and
not
in substitution for, measures prepared in accordance with GAAP.
Conference
Call Information
CenturyTel
will host a conference call today at 9:30 a.m. Central Time. Interested parties
can access the call by dialing 866.847.7860. A live, listen-only webcast will
also be accessible through the Investor Relations portion of CenturyTel’s Web
site at http://www.centurytel.com.
If
you
are unable to participate during the live webcast, the call will be archived
on
the Investor Relations portion of CenturyTel’s Web site through January 8, 2007.
A replay of the conference call will be accessible through December 27, 2006,
by
calling 888.266.2081 and entering the access code: 1016606.
In
addition to historical information, this release includes certain
forward-looking statements, estimates and projections that are based on current
expectations only, and are subject to a number of risks, uncertainties and
assumptions, many of which are beyond the control of the Company. Actual
events
and results may differ materially from those anticipated, estimated or projected
if one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect. Factors that could affect actual results include
but are not limited to: the Company’s ability to effectively manage its
expansion opportunities, including its ability to integrate Madison
River’s business into the Company’s operations and systems, to
realize the synergies expected from this transaction, and to retain and
hire key personnel; higher than anticipated interest rates; the inability
to
receive regulatory approvals related to this transaction in a timely manner
or
at all; the timing, success and overall effects of competition from a wide
variety of competitive providers; the risks inherent in rapid technological
change; the effects of ongoing changes in the regulation of the communications
industry; the Company’s ability to effectively manage its expansion
opportunities, including retaining and hiring key personnel; possible changes
in
the demand for, or pricing of, the Company’s products and services; the
Company’s ability to successfully introduce new product or service offerings on
a timely and cost-effective basis; the Company’s ability to collect its
receivables from financially troubled communications companies; the Company’s
ability to successfully negotiate collective bargaining agreements on
reasonable terms without work stoppages; the effect of adverse weather; other
risks referenced from time to time in the Company’s filings with the Securities
and Exchange Commission (the “SEC”); and the effects of more general factors
such as changes in interest rates, in tax rates, in accounting policies or
practices, in operating, medical or administrative costs, in general market,
labor or economic conditions, or in legislation, regulation or public policy.
These and other uncertainties related to the Company’s business are described in
greater detail in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2005, as updated by the Company’s subsequent SEC reports. You
should be aware that new factors may emerge from time to time and it is not
possible for management to identify all such factors, nor can it predict
the
impact of each such factor on the business or the extent to which any one
or
more factors may cause actual results to differ from those reflected in any
forward-looking statements. You are further cautioned not to place undue
reliance on these forward-looking statements, which speak only as of
the date of this release. The information contained in this release is as
of
December 18, 2006. The Company undertakes no obligation to update any of
its
forward-looking statements for any reason.
About
CenturyTel
CenturyTel
(NYSE: CTL) is a leading provider of communications, high-speed Internet and
entertainment services in small-to-mid-size cities through our broadband and
fiber transport networks. Included in the S&P 500 Index, CenturyTel delivers
advanced communications with a personal touch to customers in 25 states. Visit
us at www.centurytel.com.
About
Madison River
Madison
River operates established rural telephone companies providing communications
services to business and residential customers in Alabama, Georgia, Illinois
and
North Carolina. Its service offerings include local and long distance voice,
high speed broadband and dial-up Internet access services. As of September
30,
2006, Madison River served approximately 238,000 voice and broadband
connections. Madison River is owned by affiliates of Madison Dearborn Partners
Inc., Goldman, Sachs & Co., Providence Equity Partners and
others.
Exhibit
99.2
Acquisition
of Madison River
Chairman
of the Board and
Chief
Executive Officer
Non-GAAP
Financial Measures
Also,
included in our presentation materials are certain non-GAAP financial
measures.
These measures are provided and valid as of December 18, 2006, only and
should
not be relied upon beyond such date. Reconciliation of such non-GAAP
measures to
the most directly comparable GAAP measure or measures are available on
our
company Web site at www.centurytel.com.
Included
in our presentation materials are certain estimates and other forward-looking
statements. They are subject to uncertainties that could cause the actual
results to differ materially. These and other important uncertainties
related to
our business are described in the Company’s filings with the Securities and
Exchange Commission. All information contained herein is current as of
December
18, 2006, and is to be considered valid only as of December 18, 2006,
regardless
of the date reviewed.
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Chairman
of
the Board and Chief Executive Officer
Executive
Vice President and Chief Financial Officer
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Highlights
of the Transaction
ö
Acquisition
of 176,000 access lines with strong financial and operating
metrics
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Expands
CenturyTel’s access line base by 8%
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99%
broadband enabled, 30% high speed Internet penetration, requiring lower
ongoing
capital
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Favorable
demographics and attractive market growth prospects
ö
Accretive
to
CenturyTel’s free cash flow before and after synergies
ö
Moderate
increase in leverage
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Preserves
ability to complete existing share repurchase plan by
mid-2007
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Maintains
operational and strategic flexibility
ö
Leverages
CenturyTel’s scale and management
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$17
million
of estimated annual cost synergies
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Gives
CenturyTel access to Fiber Network capacity which is complementary to
existing
operations
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Transaction
Value:
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$830
million,
including assumption of $494 million of net indebtedness as
of
9/30/2006
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Estimated
Transaction Multiples:
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Free
Cash
Flow Before Synergies: 9.6x LTM
Free
Cash
Flow After Synergies: 7.4x LTM
EBITDA
Before
Synergies: 8.4x LTM
EBITDA
After
Synergies: 7.2x LTM
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Estimated
Accretion:
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Free
Cash
Flow Before Synergies: approximately 4% LTM
Free
Cash
Flow After Synergies: approximately 6% LTM
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Structure:
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All
cash
acquisition of stock of Madison River
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Financing:
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Existing
or
additional borrowing capacity and free cash flow
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Pro
forma Leverage:
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2.6x
Net Debt
/ LTM EBITDA
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Required
Approvals:
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FCC,
HSR, and
AL, GA, IL and NC PUCs
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Expected
Closing:
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Second
Quarter of 2007
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Overview
of
Madison River
ö
Operations
in
AL, GA, IL, NC
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64
lines per
square mile
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Population
density of 107 persons per sq. mile
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Household
income of ~$59,000 vs. national average of ~$62,500.
ö
High
quality network with attractive margins and strong broadband penetration
rates
ö
Complementary
Fiber Network
ö
Solid
3Q06
Y-o-Y performance:
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Access
lines
declined 2.7%
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19%
increase
in high speed Internet customers
ö
Owned
by Madison Dearborn, Goldman Sachs, Providence Equity, and
others
ö
Extremely
attractive acquisition opportunity
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Strong
operational performance
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High
broadband penetration and 99% enabled
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Favorable
market demographics with attractive growth
prospects
ö
Acquisition
meets financial goals
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Free
cash
flow accretive before synergies
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Ability
to
acquire with modest additional leverage
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Maintains
CenturyTel’s flexibility
ö
Expect
to
complete current share repurchase program
ö
Significant
post-integration synergies
