Commonwealth to be bought by Citizens for $1.16 billion

Striking a cash and stock deal worth US$1.16 billion, Citizens Communications Co., a rural telephone service provider agreed to buy local exchange carrier Commonwealth Telephone Enterprises Inc. on Monday.

Stamford, Connecticut.-based Citizens Communications, which offers telephone, Internet and cable services in 23 states, said the acquisition will help to inflate its presence in Pennsylvania.

Commonwealth Telephone which is based in Pennsylvania will receive $31.31 in cash and 0.768 shares of Citizens' common stock. The cash portion of the acquisition will be financed with a combination of cash in hand and debt with a commitment for financing from Citigroup Inc; as planned by Citizens.

“Commonwealth has operated its Pennsylvania markets successfully for many years,'' Citizens Chief Executive Officer Maggie Wilderotter said in the statement. ``We will build on this momentum.''

The acquisition of Commonwealth will make Citizens, which operates under the “Frontier'' brand name, the seventh-largest local telephone company in the U.S with an annual revenue of about $7.4 billion.

The companies will have mutual annual sales of about $2.4 billion. Citizens said, it will have 2.6 million phone customers and 388,000 broadband Internet subscribers. The deal is subject to regulatory and shareholder approval but has already been approved by the boards of both the companies. The transaction is expected to close in mid-2007.

At $41.72 a share, the offer represents 8.3 per cent premium to Commonwealth’s closing share price of $38.52., Sept. 15.

Shares of Citizens went down 26 cents to $13.55 on Sept. 15 in New York Stock Exchange composite trading. Commonwealth increased 34 cents to $38.52 in NASDAQ Stock Market composite trading.