Searchlight buyout offer at $4 a share (~$460mm implied market cap or ~$2.6bln EV). Obviously good news for the stock short-term but will be interesting to see what CNSL investors think; stock started the year ~$4, so this likely locks in a loss for most. I suspect most were looking at CNSL as a high risk bet with massive upside potential, so locking in at $4 isn't that exciting to them.
Offer makes sense for Searchlight but definitely aggressive - get control of business for $300mm more and direct how they recoup their investment (>$500mm with preferred accruing). Also mentioned they would invest more capital to fund the fiber build, hinting the build isn't currently fully funded..
Interesting post. I appreciated your view of an industry that has always been somewhat opaque to me. You mention "The market rightly focuses on the fiber transformation for Consolidated (and other legacy telcos)" - what are the other legacy telcos you consider peers of CNSL? Are there any that you view to be more distressed or that possess less valuable assets than CNSL?
Appreciate the comments and glad you found the post useful! On the fiber transformation comment, you have the likes of AT&T, Lumen, Frontier, and Consolidated overbuilding legacy copper footprints with fiber (Altice is doing the same but overbuilding their coax footprint); you also have some private firms like Ziply as well.
I don’t follow Lumen as closely, but it’s in pretty bad shape with ~$20bln in debt and a ~$2.5bln of market cap. Frontier is probably the closest comparison for Consolidated, both received some form of financing in the last year couple of years (CNSL PE financing and FYBR emerged from BK) and plan to overbuild ~60-70% of their footprint with fiber.
The private equity bid does change things for Consolidated though, it’s now trading just under the $4 offer price. It’s interesting because most of the bulls believe it’s got 5-10x potential, so aren’t happy with the bid (but it’s up >30% since I put out this article). Will be interesting to see how it plays out (FYI - i haven't had a chance to read their Q1 earnings yet).
Searchlight buyout offer at $4 a share (~$460mm implied market cap or ~$2.6bln EV). Obviously good news for the stock short-term but will be interesting to see what CNSL investors think; stock started the year ~$4, so this likely locks in a loss for most. I suspect most were looking at CNSL as a high risk bet with massive upside potential, so locking in at $4 isn't that exciting to them.
Offer makes sense for Searchlight but definitely aggressive - get control of business for $300mm more and direct how they recoup their investment (>$500mm with preferred accruing). Also mentioned they would invest more capital to fund the fiber build, hinting the build isn't currently fully funded..
https://www.sec.gov/Archives/edgar/data/1304421/000119312523099940/0001193125-23-099940-index.htm
Interesting post. I appreciated your view of an industry that has always been somewhat opaque to me. You mention "The market rightly focuses on the fiber transformation for Consolidated (and other legacy telcos)" - what are the other legacy telcos you consider peers of CNSL? Are there any that you view to be more distressed or that possess less valuable assets than CNSL?
Appreciate the comments and glad you found the post useful! On the fiber transformation comment, you have the likes of AT&T, Lumen, Frontier, and Consolidated overbuilding legacy copper footprints with fiber (Altice is doing the same but overbuilding their coax footprint); you also have some private firms like Ziply as well.
I don’t follow Lumen as closely, but it’s in pretty bad shape with ~$20bln in debt and a ~$2.5bln of market cap. Frontier is probably the closest comparison for Consolidated, both received some form of financing in the last year couple of years (CNSL PE financing and FYBR emerged from BK) and plan to overbuild ~60-70% of their footprint with fiber.
The private equity bid does change things for Consolidated though, it’s now trading just under the $4 offer price. It’s interesting because most of the bulls believe it’s got 5-10x potential, so aren’t happy with the bid (but it’s up >30% since I put out this article). Will be interesting to see how it plays out (FYI - i haven't had a chance to read their Q1 earnings yet).
Matt, thanks for the quick reply. Appreciate the competitive overview.
Interesting that Eric Zinterhofer of Searchlight bought Charter's stock from market roughly at end of last year (thinking emoji).