Shenandoah to acquire Horizon Telecom for $385M

Shenandoah announced it has entered into a definitive agreement to acquire 100% of the equity interests in Horizon Acquisition Parent for $385M. Consideration will consist of $305M in cash and $80M of Shentel common stock. Horizon is a commercial fiber provider in Ohio and adjacent states serving national wireless providers, carriers, enterprises, and government, education and healthcare customers. Horizon’s 7,200 route-mile fiber network is the largest and most dense network across its footprint with over 9,000 on-net locations. Approximately 64% of Horizon’s revenues are derived from their commercial customers. Based in Chillicothe, Ohio, Horizon was founded in 1895 as the incumbent local exchange carrier in Ross County, Ohio and rapidly expanded its fiber network over the past 14 years. Most recently, Horizon has pursued a strategy of investing in Fiber-to-the-Home in tier 3 & 4 markets in Ohio and currently passes 14,000 homes and businesses with fiber in its ILEC market and 18,000 homes in new, greenfield markets adjacent to its commercial fiber network. The transaction is subject to certain regulatory approvals and other customary closing conditions and is expected to close in the first half of 2024. The purchase price, less present value of tax benefits, represents:12.9x 2022 Horizon adjusted EBITDA multiple net of synergies and approximately $51,000 per fiber route mile. Shentel intends to fund the transaction with a combination of existing cash resources, revolving credit facility capacity and an amended and upsized credit facility. The company has received $275M in financing commitments from CoBank, Bank of America, Citizens Bank, N.A., and Fifth Third Bank, N.A..GCM Grosvenor, a selling unit holder of Horizon, will exchange its equity interest in Horizon for 4.08M shares of Shentel common stock with an aggregate value of $80M based on a reference price of $19.604 resulting in GCM owning approximately 7% of Shentel’s fully diluted common shares after the transaction is closed. Shentel has entered into a 7% participating exchangeable perpetual preferred stock investment agreement with Energy Capital Partners, or ECP, an existing Shentel shareholder and long-time infrastructure investor, to provide $81M of growth capital to fund the FTTH network expansion, the government grant projects and general corporate purposes. The dividend can be paid in cash or in-kind at the option of the company. The preferred stock can be exchanged for Shentel common stock at an exchange price of $24.50, a 25% premium to the reference price of $19.604, under certain conditions as outlined in the investment agreement. This financing is expected to close in conjunction with the transaction. The company plans to raise additional growth capital for the FTTH network expansion, Government Grant Projects and general corporate purposes, which may include exploring strategic alternatives for its tower portfolio.