Verizon Agrees to Spin Off Local Telephone Business In Northern New England
Wednesday, January 17, 2007
Verizon had previously indicated it might sell or divest its northern New England assets, which include 1.5 million residential phone lines and high-speed Internet service to about 180,000 customers. The operation also provides long-distance service to more than 600,000 homes.
FairPoint, based in Charlotte, owns local phone networks in 31 mostly rural markets in 18 states, including the three where it is acquiring Verizon's operations.
The two companies said there would be no layoffs resulting from the sale, and FairPoint said it expected to hire 600 employees in the three-state region. All but 300 of the 3,300 employees that work for the spun-off unit would work for FairPoint. The remaining 300 would continue to work for Verizon.
The Verizon operations being sold would first be transferred to a newly created unit that would issue $1.7 billion worth of new debt before being sold to FairPoint.
Of the $2.72 billion being paid by FairPoint in the deal, Verizon shareholders would receive about $1.02 billion in FairPoint stock. Verizon would receive $1.7 billion, consisting of both cash and an undisclosed portion of the debt securities issued before the spinoff. Verizon would not own any shares in FairPoint after the transaction is completed.
Verizon said it may exchange the newly issued debt for some of its own outstanding debt to reduce its overall liabilities. Verizon ended the third quarter with debt of $41.7 billion, about $9 billion of which was transferred to the phone book and online directories business spun off as Idearc in November.
The deal with FairPoint is expected to be completed within the next year.