APRIL 2, 2008 -- Alaska Communications Systems Group Inc. today announced that it has entered into an agreement to purchase Crest Communications Corp., owner and operator of the North Star submarine fiber-optic cable, one of three existing submarine fibers connecting Alaska to the continental United States. ACS is acquiring Crest, free of debt, for a cash consideration of approximately $70 million. The transaction, which is subject to various closing conditions as well as federal and state regulatory approval, is expected to close in the second half of 2008.
"This acquisition tightly complements our new fiber build, the Alaska Oregon Network (AKORN), by providing meaningful operating efficiencies and cost synergies; offering enterprise customers the only diverse and redundant routing of traffic between Alaska and the Lower 48 from a single carrier; enabling traffic management via Network Operations Control Centers in Alaska and the Lower 48; and connecting to Southeast Alaska on the way to the Lower 48," reports Liane Pelletier, ACS president, CEO, and chair. "The acquisition will also drive further utilization of ACS' differentiated Alaska terrestrial assets from Crest's customer base and allow ACS to participate in the fast-growing bandwidth market ahead of AKORN's turn up date of Q109."
ACS expects the acquisition will provide it with a new source of cash flows: $11 million in annual recurring revenue; an EBITDA contribution from recurring revenue of $3 million annually; and additional non-recurring IRU sales that have averaged approximately $9 million per year.
Crest's system includes an undersea fiber system of approximately 1,900 miles with cable landing facilities in Whittier, Juneau, and Valdez, Alaska, and Nedonna Beach, Oregon. The system also includes terrestrial transport components linking Nedonna Beach to a Network Operations Control Center in Hillsboro, Oregon, and collocation facilities in Portland, Oregon, and Seattle, Washington. Crest has 18 employees responsible for its network, sales, regulatory compliance, and administration.
ACS expects the Crest acquisition to provide cost synergies of approximately $1 million per annum in operating expenses for AKORN. ACS plans to fund a substantial portion of the purchase price from cash on hand, cash flow from operations, and by drawing up to $20 million on its existing revolving credit facility.