Otelco Inc. (NASDAQ: OTEL), which provides wireline services in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont, and West Virginia, says it has agreed to be acquired by affiliates formed by private equity firm Oak Hill Capital. Oak Hill will pay $11.75 per share in cash, which represents an equity purchase price of $40.6 million and an enterprise value of $105.6 million. Oak Hill also will assume or refinance Otelco’s outstanding debt. The deal is expected to close in the fourth quarter of this year.
Otelco says the $11.75 per share is a 43.3% premium to the company’s unaffected share price as of June 23, 2020, a 53.2% premium to the 20-day volume weighted average price as of the same date, and a 58.1% premium to Otelco’s average daily closing stock price during the second quarter of 2020. The company’s board of directors approved the merger agreement, declared it advisable, and recommended approval and adoption of the merger agreement by company shareholders.
The service provider offers local and long-distance voice, digital high-speed data lines, transport services, network access, pay-TV, and other related services. Otelco says it has more than 33,000 customers, with approximately 10% of these served over its Lightwave product. The company operates 11 incumbent telephone companies serving rural markets, or rural local exchange carriers (see, for example, "ADTRAN wins new order for multiservice access platform"). It also provides and wholesale communications services and technology consulting, managed services, and private/hybrid cloud hosting services through subsidiaries.
“Like much of the telecommunications industry, Otelco is rapidly deploying technology, including fiber to the premise, to increase internet speeds for our customers,” explained Richard Clark, President and CEO of Otelco. “We have invested in fiber network construction over the last several years in response to the demand for higher bandwidth and have demonstrated our ability to deliver the necessary technology. Oak Hill has invested capital in other telecommunications providers to advance the deployment of the technology needed to support up to 1 gigabit internet speeds. Oak Hill’s commitment to facilitate Otelco’s growth will allow the company to accelerate fiber growth plans that would not have been possible within our existing capital structure.”
“This transaction is a good outcome for Otelco’s shareholders, customers and employees. We believe Oak Hill will provide the resources to speed up our network upgrade plan and wish them and the Company continued success,” added Stephen McCall, chairman of Otelco’s board.
“Otelco has assembled a talented leadership team capable of ramping up their deployment of advanced technology solutions,” said Jennifer Jun, principal at Oak Hill. “With our experience and capital, we can support Otelco’s mission to serve more customers with increasing broadband speeds. We look forward to working with Richard and the rest of Otelco’s senior management team in executing on Otelco’s next chapter of growth.”
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