Embarq will sell to CenturyTel in $11.6 billion deal
Kansas City Business Journal
CenturyTel Inc. will acquire Embarq Corp. in an $11.6 billion deal, the companies announced Monday.
CenturyTel, based in Monroe, La., will assume $5.8 billion in debt as part of the all-stock merger.
Shareholders in Overland Park-based Embarq will receive 1.37 CenturyTel shares for every Embarq share. After the deal, Embarq shareholders will own about 66 percent of the combined company.
CenturyTel CEO Glen Post will lead the combined company.
The deal is expected to close in the second quarter of 2009, subject to approvals from shareholders and federal and state regulators.
The companies expect the combination to save about $400 million annually within the first three years by such measures as reducing corporate overhead and cutting duplicative functions.
Embarq CEO Tom Gerke said in a Monday conference call that he has “substantial enthusiasm” for the deal, which will benefit customers and shareholders.
“Together we’ll be much stronger than operating alone,” said Gerke, who will be executive vice chairman of the CenturyTel board.
Embarq, the nation’s No. 4 local phone service provider, ranks No. 3 on the Kansas City Business Journal’s list of area public companies. Earlier this year, Embarq reported employing about 17,000 people companywide, with about 3,450 in the metropolitan area.
Embarq stock closed at $30.38, up 64 centes, or 2.15 percent. Volume on Monday was more than triple the three-month average.
Also on Monday, Embarq and CenturyTel reported third-quarter earnings.
CenturyTel (NYSE: CTL) reported declines in operating revenue and net income for the third quarter. For the quarter that ended Sept. 30, the company had operating revenue excluding nonrecurring items of $650.1 million, down 8.2 percent from $708.3 million for the same period in 2007. Net income excluding nonrecurring items was $82.8 million, or 82 cents a share, in the third quarter, down 23.5 percent from net income of $108.1 million, or 97 cents a share, in the comparable period.
CenturyTel had 2.041 million access lines at the end of the third quarter, down 130,000 or about 6 percent from the third quarter of 2007. The company said it gained 20,600 high-speed Internet customers during the quarter.
Embarq (NYSE: EQ) reported revenue of $1.5 billion for the quarter, down from $1.6 billion for the comparable period. The company did, however post an increase in net income, at $160 million, or $1.11 a share, for the third quarter, compared with net income of $157 million, or $1.01 a share, for the same period in 2007. Embarq’s earnings for the quarter were cut by an expense of $66 million, or 29 cents a share, related to reductions in the company’s employee count.
The company lost 169,000 access lines during the third quarter. It now has 5.85 million access lines.
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