Cincinnati Bell Hooks Up With Hawaiian Telcom

$650M deal represent 23% premium

Cincinnati Bell said it has agreed to purchase Hawaiian Telcom in a cash and stock deal valued at about $650 million.

According to Cincinnati Bell, Hawaiian Telcom shareholders can opt to receive either $30.75 per share in cash and 1.6305 shares of Cincinnati Bell stock or a combination of $18.45 per share in cash and 0.6522 shares of Cincinnati Bell stock for every share of Hawaiian Telcom they own. The price represents a 23.7% premium to Hawaiian Telecom’s share price over the past 20 days.

In early trading Monday, Hawaiian Telcom stock soared nearly 20% ($4.81 per share) to $29.25 each. It was priced at $28.60 each (up 17%) at about 10:12 a.m. on Monday. Cincinnati Bell shares fell nearly 10% ($1.85 each) to $17.50 in early trading before rising slightly to $17.70 each (down 8.5%) by 10:07. a.m.

Cincinnati Bell has also signed a definitive agreement to acquire OnX Enterprise Solutions, a technology services and solutions provider in North America and the United Kingdom, for $201 million in cash. The transactions advance Cincinnati Bell’s refined strategy to focus on growing its business in two distinct areas: network communications and enterprise IT services.

“Cloud migration, the need for fiber infrastructure that supports 5G-ready, high-density data transmission and IoT are the key trends that will define telecommunications in the future,” said Cincinnati Bell CEO Leigh Fox in a statement. “The implementation of our refined strategy, coupled with today’s combinations, will help build two distinct businesses with the appropriate scale, structure and leadership to deliver superior operating results, while providing strategic optionality from a diversified but complementary portfolio of assets. Today’s announcement positions us to capitalize on these favorable market dynamics while enhancing our leadership at the forefront of the telecommunications landscape. Together, Hawaiian Telcom and OnX bring Cincinnati Bell greater financial and operational scale and established market positions in new geographies.”

Hawaiian Telcom has about 1,300 employees and combined with Cincinnati Bell’s 3,000 workers is expected to create a stronger company focused on innovation and offering superior products and services, the telco said in a statement. Cincinnati Bell added that it is committed to Hawaiian Telcom’s workforce and added that because of distance and separate operations, the merger is not expected to materially impact jobs in Hawaii.

Cincinnati Bell has committed to investing in Hawaiian Telcom’s next-generation fiber network statewide, which will create additional opportunities for growth. Cincinnati Bell and Hawaiian Telcom will retain their names and separate brand identities while sharing resources. Hawaiian Telcom will continue to be locally managed from Hawaii and its union labor agreements will be honored.

According to the deal, Hawaiian Telcom will have two seats on the combined company board of directors, which will be held by Hawaii residents.

For Cincinnati Bell, the deal gives it access to Hawaiian Telcom’s rich fiber assets in Honolulu and the growing neighbor islands, while providing HT with added liquidity and the capital to expand its fiber reach. The companies’ combined fiber networks will exceed 14,000 fiber route miles. In addition, Hawaiian Telcom provides direct access to the 2.6TB of Trans-Pacific fiber cable capacity linking Asia and the U.S., which expands Cincinnati Bell’s route diversity and gives the combined company exposure to areas on both sides of the Pacific.

“Cincinnati Bell’s track record of success and commitment to investing in the build-out of its regional fiber network in both urban and non-urban areas over the past decade makes it a great partner for Hawaiian Telcom,” said Hawaiian Telcon CEO Scott Barber in a statement. “We look forward to sharing our companies’ fiber expertise and enhanced service offerings as we continue to expand our next-generation fiber network throughout the Hawaiian Islands. With our highly complementary values, distinctive brands focused on fiber as the future, and our shared commitment to the communities in which we operate, I am confident that this partnership will provide great opportunities for growth and value creation to both Hawaiian Telcom and Cincinnati Bell, along with our customers and partners.” Moelis & Company and Morgan Stanley & Co. LLC are acting as financial advisors to Cincinnati Bell for the Hawaiian Telcom and OnX transactions; Stephens Inc. is also acting as financial advisor for the OnX transaction. Cravath, Swaine & Moore LLP, Morgan, Lewis & Bockius, and BosseLaw, PLLC are serving as legal counsel for both transactions. UBS Investment Bank is acting as financial advisor to Hawaiian Telcom, and Gibson Dunn & Crutcher, LLP is serving as legal counsel. Raymond James & Associates, Inc. is acting as financial advisor to OnX, and Schulte Roth & Zabel LLP is serving as legal counsel.