Windstream spinoff CS&L changes name to Uniti Group, announces $170 deal to buy Hunt Telecom

by Wesley Brown ([email protected]) 9,609 views 

Little Rock’s Communication Sales & Leasing said Thursday (Feb. 23) that it will change its bulky corporate name to “Uniti Group Inc.”, and will begin trading under the stock symbol UNIT when the first opening bell rings on the Nasdaq Stock Exchange next week.

The name change was announced as the company reported a fourth quarter loss and signed a deal to acquire Hunt Telecommunications for an initial consideration of $170 million in cash and equity. Hunt Telecom, based in Hammond, La., is a provider of data transport to K–12 schools and government agencies with a dense network of 140,000 fiber strand miles and 2,600 fiber route miles in Louisiana.

According to the company’s website, the telecom backbone operator has more than 70 employees and provides Internet network services for mostly commercial users in nine states. The Louisiana firm’s customer base includes the Department of Defense and several other federal and local government agencies, and tech giants such as Microsoft, Siebel and EDS.

“The acquisition of Hunt advances CS&L’s diversification strategy, and accelerates Uniti Fiber’s focus on the growing E-Rate, enterprise and government sectors,” said President and CEO Kenny Gunderman. “As we integrate Hunt and Uniti Fiber, we expect to capture $2.5 million in annual run-rate cost savings within 18 months from closing.”

Still, the strategic Louisiana acquisition and name change were unable to undo the company’s continued string of quarterly losses. For the period ended Jan. 31, 2016, CS&L reported a net loss of $4.4 million, or 4 cents per share, compared to a profit of $7.4 million, or 5 cents per share in the same period a year ago. Revenues, however, rose 19% to nearly $207 million, up from $174 million in the fourth quarter of 2015.

Uniti Group reported funds from operations (FFO) of $101.8 million, or 66 cents per share. Funds from operations is a closely-watched measure in the REIT industry that takes net income and adds back items such as depreciation and amortization. Wall Street had expected Arkansas’ first publicly-held REIT to report fourth quarter earnings of one cent per share on revenue of $206.8 million, according to Thomson Reuters.

Officials said its Uniti Fiber subsidiary contributed $31.6 million of revenues and $11.1 million of adjusted EBITDA for the fourth quarter of 2016. Uniti Fiber’s results include a full quarter of operations for both Tower Cloud and PEG Bandwidth, both recent acquisitions. Uniti Fiber’s capital expenditures during the quarter included $21.1 million of success-based and $1.2 million related to maintenance.

For the full year, the Little Rock-based spin-off of Windstream Holdings Inc. reported a net loss of $212,000 or four cents per share, compared to earnings of $24.9 million, or 16 cents per share. Yearly revenue rose nearly 62% to $770.4 million, compared to $476 million in the same period of 2016.

“We made excellent progress during 2016 executing our strategy. We deployed over $700 million of capital in mission critical communication infrastructure assets, continued to diversify our revenues with high quality customers, expanded our management team, and established Uniti Fiber as a platform for future growth,” said Gunderman.

In October 2016 and February 2017, CS&L entered into two separate transactions that repriced $2.1 billion of term loans outstanding under its revolving credit agreement. Under each transaction, the interest rate decreased 50 basis points. CS&L still has liabilities of $4.6 billion on the book, largely related to its spin-off from Windstream in April 2015.

Going forward, the Arkansas real estate investment vehicle for telecom and fiber assets, said it expects yearly earnings to remain flat or up slightly to five cents per share. That forecast does not include the Hunt Telecom deal or any future acquisition, company officials said. Revenues are expected to grow nearly 10% in the range of $841 million to $847 million.

In Thursday’s morning session on the Nasdaq stock exchange, CS&L shares were up 59 cents, or 2.2% at $27.34. The Arkansas publicly-traded concern’s stock has traded in the range of $22.50 and $32.73 over the past 52 weeks.

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