UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
13E-3
RULE 13E-3 TRANSACTION STATEMENT UNDER
SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934
Consolidated
Communications Holdings, Inc.
(Name of the Issuer)
Consolidated
Communications Holdings, Inc.
Condor Holdings LLC
Condor Merger Sub Inc.
Searchlight III CVL, L.P.
Searchlight III CVL GP, LLC
(Names of Persons Filing Statement)
Common Stock, $0.01 par value
(Title of Class of Securities)
209034107
(CUSIP Number of Class of Securities)
J.
Garrett Van Osdell
Chief Legal Officer
Consolidated Communications Holdings, Inc.
2116 South 17th Street
Mattoon, Illinois 61938-5973
(217) 235-3311
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Persons Filing Statement)
With copies to
Robert I. Townsend, III
O. Keith Hallam, III
Cravath, Swaine & Moore LLP
825 8th Avenue
New York, NY 10019
(212) 474-1000 |
Steven A. Cohen
Victor
Goldfeld
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
(212) 403-1000 |
Ryan J. Maierson
Ryan
J. Lynch
Latham & Watkins LLP
811 Main Street
Houston, TX 77002
(713) 546-7420 |
This statement is filed in connection with (check
the appropriate box):
a. |
x |
The filing of solicitation materials
or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. |
b. |
¨ |
The filing of a registration statement under the Securities
Act of 1933. |
c. |
¨ |
A tender offer. |
d. |
¨ |
None of the above. |
Check the following box if the soliciting materials
or information statement referred to in checking box (a) are preliminary copies: x
Check the following box if the filing is a final
amendment reporting the results of the transaction: ¨
INTRODUCTION
This Rule 13e-3 transaction statement on Schedule
13E-3, together with the exhibits hereto (this “Schedule 13E-3” or “Transaction Statement”), is being filed with
the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the “Exchange Act”), jointly by the following persons (each,
a “Filing Person,” and collectively, the “Filing Persons”): (i) Consolidated Communications Holdings, Inc. (“Consolidated”
or the “Company”), a Delaware corporation and the issuer of the common stock, par value $0.01 per share (the “Shares”),
that is subject to the Rule 13e-3 transaction, (ii) Condor Holdings LLC, a Delaware limited liability company (“Parent”),
(iii) Condor Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), (iv) Searchlight
III CVL, L.P., a Delaware partnership and the sole member of Parent (“Searchlight III CVL”) and (v) Searchlight III CVL GP,
LLC, a Delaware limited liability company and the general partner of Searchlight III CVL (“Searchlight III CVL GP”). Parent,
Merger Sub, Searchlight III CVL and Searchlight III CVL GP are Filing Persons of this Transaction Statement because they are affiliates
of the Company under the SEC rules governing “going-private” transactions.
On
October 15, 2023, the Company entered into an Agreement and Plan of Merger (as amended, restated, supplemented or otherwise modified
from time to time, the “Merger Agreement”) with Parent and Merger Sub, pursuant to which, subject to the terms and
conditions thereof, Merger Sub will merge with and into the Company (the “Merger”) with the Company continuing as the surviving
corporation and a wholly owned subsidiary of Searchlight III CVL.
In
connection with the Merger Agreement, Parent has obtained equity financing commitments from British Columbia Investment Management
Corporation, in respect of a pooled investment portfolio formed under the Pooled Investment Portfolios Regulation (British Columbia)
and known as the “2020 Private Equity Fund” (“BCI”) and certain affiliates of Parent (together with BCI, the
“Guarantors”) in an aggregate amount of $370,000,000 to fund the transactions contemplated by the Merger Agreement (the “Equity
Commitment Letters”). The consummation of the Merger is not subject to a financing condition. The Company is entitled to specific
performance, subject to the terms and conditions of the Merger Agreement and the applicable equity commitments, to require each Guarantor
to fund its respective equity commitment and Parent to close the Merger, if, among other things, all closing conditions are met. In addition,
concurrently with the execution of the Merger Agreement, each of the Guarantors also entered into a limited guaranty with the Company
(the “Limited Guaranties”) pursuant to which the Guarantors have each provided a limited guaranty with respect to the payment
of their pro rata portion of certain payment obligations of Parent and Merger Sub that may be owed to the Company under the Merger Agreement
up to the applicable aggregate amount set forth in the Limited Guaranties.
Subject
to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”),
each Share issued and outstanding immediately prior to the Effective Time (other than Shares (i) held by Parent, Merger Sub, or any subsidiary
of the Company or Parent, (ii) held by the Company as treasury shares or (iii) held by any person who properly exercises appraisal rights
under Delaware law (collectively, the “Excluded Shares”)) shall be converted into the right to receive an amount in cash
equal to $4.70 per share, without interest (the “Merger Consideration”), subject to any withholding of taxes required by
applicable law.
In addition, pursuant to the Merger Agreement,
at the Effective Time, (i) each award of restricted shares of Company common stock subject to time-based vesting conditions that is held
by a non-employee director or by certain affiliates of Parent (each, a “director Company RSA”) will vest and be converted
into the right to receive a cash payment equal to (a) the Merger Consideration multiplied by (b) the number of shares of Company common
stock subject to such director Company RSA, (ii) each other award of restricted shares of Company common stock that remains subject solely
to service-based vesting conditions (each, a “Company RSA”) will be converted into an award representing the right to receive
an amount in cash (without interest) (a “contingent cash award”) with a value equal to (a) the Merger Consideration multiplied
by (b) the number of shares of Company common stock subject to such Company RSA and (iii) each performance-based award of restricted
shares of Company common stock (each, a “Company PSA”) will be converted into a contingent cash award with a value equal
to (a) the Merger Consideration multiplied by (b) the number of shares of Company common stock subject to such Company PSA. The number
of shares of Company common stock subject to a Company PSA will be determined based on the number of shares of Company common stock that
would have been earned under such Company PSA based on the actual level of achievement of the performance goals (other than the total
shareholder return modifier, which will be deemed to be achieved at the target level (i.e., 100%)) through the end of the performance
period (as determined by the board of directors of the surviving corporation (or the appropriate committee thereof) in reasonable good
faith).
Each contingent cash award will be subject to
the same terms and conditions (other than the total shareholder return modifier), including vesting conditions, applicable to the underlying
Company RSA or Company PSA from which it was converted (including any accelerated vesting terms and conditions).
Concurrently with the execution of the Merger
Agreement, the Company entered into a voting agreement (the “Voting Agreement”) with Searchlight III CVL, which, directly
or indirectly, beneficially owns approximately 33.8% of the outstanding Shares, pursuant to which, among other things, Searchlight III
CVL has agreed to vote (or cause to be voted) all of the Shares held by Searchlight III CVL or Searchlight Capital Partners, L.P. in
favor of the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated by the Merger Agreement.
Concurrently with the filing of this Schedule
13E-3, the Company is filing with the SEC a preliminary proxy statement (the “Proxy Statement”) under Regulation 14A of the
Exchange Act, relating to a special meeting of the stockholders of the Company (the “Special Meeting”) at which the stockholders
of the Company will consider and vote upon a proposal to adopt the Merger Agreement and cast an advisory (non-binding) vote to approve
the compensation that may be paid or become payable to the named executive officers of the Company in connection with the consummation
of the Merger. The adoption of the Merger Agreement will require the affirmative vote (in person or by proxy) of the holders of (a) a
majority of the voting power represented by the Shares that are entitled to vote thereon in accordance with the Delaware General Corporation
Law and (b) a majority of the voting power represented by the Shares that are entitled to vote thereon in accordance with the DGCL and
held by Unaffiliated Stockholders (as defined in the Proxy Statement). A copy of the Proxy Statement is attached hereto as Exhibit (a)(2)(i)
and incorporated herein by reference. A copy of the Merger Agreement is attached hereto as Exhibit (d)(i) and is also included as Annex
A to the Proxy Statement and incorporated herein by reference.
The board of directors of the Company (the “Board”)
formed a special committee of independent and disinterested members of the Board (the “Special Committee”) to, among other
things, evaluate the Merger, and the Special Committee has unanimously determined that it was fair to and in the best interests of the
Company and the Unaffiliated Stockholders for the Company to enter into the Merger Agreement and unanimously recommended that the Board:
(i) approve and declare advisable the Merger Agreement and the transactions contemplated by the Merger Agreement, (ii) approve the execution,
delivery and performance of the Merger Agreement by the Company and the consummation of the Merger and the other transactions contemplated
by the Merger Agreement, (iii) direct that the Merger Agreement be submitted to the holders of Shares entitled to vote thereon for its
adoption and (iv) recommend the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated by
the Merger Agreement by the holders of Shares.
The Board, acting upon the recommendation of the
Special Committee, by unanimous vote of those directors present at a special meeting of the Board (excluding the Searchlight Directors,
who recused themselves), determined that it was fair to and in the best interests of the Company and the Unaffiliated Stockholders for
the Company to enter into the Merger Agreement and approved and declared advisable the Merger Agreement and the transactions contemplated
by the Merger Agreement and (i) approved the execution, delivery and performance of the Merger Agreement by the Company and the consummation
of the Merger and the other transactions contemplated by the Merger Agreement, (ii) directed that the Merger Agreement be submitted to
the holders of Shares entitled to vote thereon for its adoption and (iii) recommended the adoption of the Merger Agreement and approval
of the Merger and the other transactions contemplated by the Merger Agreement by the holders of Shares.
The Merger is subject to the satisfaction or waiver
of the conditions set forth in the Merger Agreement, including the approval and adoption of the Merger Agreement by the Company’s
stockholders.
The cross-references below are being supplied
pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to be included
in response to the items of Schedule 13E-3. Pursuant to General Instruction F to Schedule 13E-3, the information contained in the Proxy
Statement, including all appendices thereto, is incorporated in its entirety herein by reference, and the responses to each item in this
Schedule 13E-3 are qualified in their entirety by the information contained in the Proxy Statement and the appendices thereto.
As of the date hereof, the Proxy Statement is
in preliminary form and is subject to completion and/or amendment. This Schedule 13E-3 will be amended to reflect such completion or
amendment of the Proxy Statement. Capitalized terms used but not expressly defined in this Schedule 13E-3 shall have the respective meanings
given to them in the Proxy Statement.
The information concerning the Company contained
in, or incorporated by reference into this Schedule 13E-3 and the Proxy Statement was supplied by the Company. Similarly, all information
concerning each other Filing Person contained in, or incorporated by reference into this Schedule 13E-3 and the Proxy Statement was supplied
by such Filing Person. No Filing Person, including the Company, is responsible for the accuracy of any information supplied by any other
Filing Person.
Item
1. Summary Term Sheet
The information set forth in the Proxy Statement
under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
Item
2. Subject Company Information
(a)
Name and Address. The information set forth in the Proxy Statement under the following caption is incorporated herein
by reference:
“THE PARTIES TO THE MERGER”
(b)
Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by
reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“THE SPECIAL MEETING — Record
Date and Stockholders Entitled to Vote”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Beneficial Ownership of Common Stock by Management and Directors”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Market Price of Shares and Dividends”
(c) Trading
Market and Price. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“SUMMARY TERM SHEET”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Market Price of Shares and Dividends”
(d)
Dividends. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Market Price of Shares and Dividends”
(e)
Prior Public Offerings. The information set forth in the Proxy Statement under the following caption is incorporated
herein by reference:
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Prior Public Offerings”
(f) Prior
Stock Purchases. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Certain Transactions in the Shares of Company Common Stock”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Past Contacts, Transactions, Negotiations and Agreements”
Item
3. Identity and Background of Filing Person
(a)–(c)
Name and Address; Business and Background of Entities; Business and Background of Natural Persons. Consolidated Communications
Holdings, Inc. is the subject company. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“THE PARTIES TO THE MERGER”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY”
“OTHER IMPORTANT INFORMATION REGARDING
PARENT”
“WHERE YOU CAN FIND ADDITIONAL
INFORMATION”
Item
4. Terms of the Transaction
(a)(1)
Tender Offers. Not Applicable.
(a)(2)
Merger or Similar Transactions. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Certain
Financial Forecasts”
“SPECIAL FACTORS — Opinion
of Rothschild & Co US Inc.”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Effects
on the Company if the Merger Is Not Consummated”
“SPECIAL FACTORS — Alternatives
to the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Material
U.S. Federal Income Tax Consequences of the Merger”
“SPECIAL FACTORS — Regulatory
Approvals in Connection with the Merger”
“SPECIAL FACTORS — Delisting
and Deregistration of Company Common Stock”
“SPECIAL FACTORS — Accounting
Treatment”
“THE SPECIAL MEETING — Vote
Required”
“THE MERGER AGREEMENT”
“THE VOTING AGREEMENT”
“DELISTING AND DEREGISTRATION
OF COMMON STOCK”
Annex A — Agreement
and Plan of Merger
(c)
Different Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein
by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“THE MERGER AGREEMENT —
Consideration To Be Received in the Merger”
“THE MERGER AGREEMENT — Treatment
of Company Equity Awards”
“THE VOTING AGREEMENT”
“PROPOSAL 2: ADVISORY COMPENSATION
PROPOSAL”
Annex A — Agreement
and Plan of Merger
Annex B — Voting
Agreement
(d)
Appraisal Rights. The information set forth in the Proxy Statement under the following captions is incorporated herein
by reference:
“SPECIAL FACTORS — Appraisal
Rights”
“THE SPECIAL MEETING — Appraisal
Rights”
Annex A — Agreement
and Plan of Merger
(e) Provisions
for Unaffiliated Security Holders. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Provisions
for Unaffiliated Stockholders”
(f) Eligibility
for Listing or Trading. Not Applicable.
Item
5. Past Contacts, Transactions, Negotiations and Agreements
(a)
Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein
by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“THE MERGER AGREEMENT”
“THE VOTING AGREEMENT”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Certain Transactions in the Shares of Company Common Stock”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Past Contacts, Transactions, Negotiations and Agreements”
“WHERE YOU CAN FIND ADDITIONAL
INFORMATION”
Annex A — Agreement
and Plan of Merger
Annex B — Voting
Agreement
(b)
Significant Corporate Events. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“THE MERGER AGREEMENT”
“THE MERGER AGREEMENT — Treatment
of Company Equity Awards”
“THE VOTING AGREEMENT”
“PROPOSAL 2: ADVISORY COMPENSATION
PROPOSAL”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Past Contacts, Transactions, Negotiations and Agreements”
Annex A — Agreement
and Plan of Merger
Annex B — Voting
Agreement
(c) Negotiations
or Contacts. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Past Contacts, Transactions, Negotiations and Agreements”
(d)
Conflicts of interest. Not Applicable.
(e)
Agreements Involving the Subject Company’s Securities. The information set forth in the Proxy Statement under
the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“THE MERGER AGREEMENT”
“THE MERGER AGREEMENT — Parent
Vote”
“THE MERGER AGREEMENT — Treatment
of Series A Preferred Stock”
“THE MERGER AGREEMENT — Treatment
of Company Equity Awards”
“THE VOTING AGREEMENT”
“PROPOSAL 2: ADVISORY COMPENSATION
PROPOSAL”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Certain Transactions in the Shares of Company Common Stock”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Past Contacts, Transactions, Negotiations and Agreements”
“WHERE YOU CAN FIND ADDITIONAL
INFORMATION”
Annex A — Agreement
and Plan of Merger
Annex B — Voting
Agreement
Item
6. Purposes of the Transaction and Plans or Proposals
(a)
Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Delisting
and Deregistration of Company Common Stock”
“DELISTING AND DEREGISTRATION
OF COMMON STOCK”
(b)
Use of Securities Acquired. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Delisting
and Deregistration of Company Common Stock”
“THE MERGER AGREEMENT”
“THE MERGER AGREEMENT — Consideration
To Be Received in the Merger”
"DELISTING AND DEREGISTRATION OF COMMON STOCK"
Annex A — Agreement
and Plan of Merger
(c)(1)–(8)
Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“SPECIAL FACTORS — Delisting
and Deregistration of Company Common Stock”
“THE MERGER AGREEMENT”
“THE MERGER AGREEMENT — Parent
Vote”
“THE MERGER AGREEMENT — Treatment
of Series A Preferred Stock”
“THE MERGER AGREEMENT — Treatment
of Company Equity Awards”
“THE VOTING AGREEMENT”
“THE SPECIAL MEETING”
“PROPOSAL 2: ADVISORY COMPENSATION
PROPOSAL”
“DELISTING AND DEREGISTRATION
OF COMMON STOCK”
Annex A — Agreement
and Plan of Merger
Annex B — Voting
Agreement
Item
7. Purposes, Alternatives, Reasons and Effects
(a)
Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
(b)
Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein
by reference:
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Opinion
of Rothschild & Co US Inc.”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Alternatives
to the Merger”
(c)
Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Opinion
of Rothschild & Co US Inc.”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Alternatives
to the Merger”
Annex C — Opinion
of Rothschild & Co US Inc.
(d)
Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Plans
for the Company After the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“SPECIAL FACTORS — Effects
on the Company if the Merger Is Not Consummated”
“SPECIAL FACTORS — Alternatives
to the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Material
U.S. Federal Income Tax Consequences of the Merger”
“SPECIAL FACTORS — Delisting
and Deregistration of Company Common Stock”
“SPECIAL FACTORS — Accounting
Treatment”
“THE MERGER AGREEMENT — Effects
of the Merger”
“THE MERGER AGREEMENT — Directors
and Officers of the Surviving Corporation”
“THE MERGER AGREEMENT — Consideration
To Be Received in the Merger”
“THE MERGER AGREEMENT — Excluded
Shares”
“THE MERGER AGREEMENT — Treatment
of Series A Preferred Stock”
“THE MERGER AGREEMENT — Treatment
of Company Equity Awards”
“THE MERGER AGREEMENT — Payment
for Securities; Surrender of Certificates”
“THE MERGER AGREEMENT — Termination
of Exchange Fund”
“THE MERGER AGREEMENT — Dissenting
Shares”
“THE MERGER AGREEMENT — Indemnification
and Insurance”
“THE MERGER AGREEMENT — Employee
Benefit Matters”
“THE MERGER AGREEMENT — Fees
and Expenses”
“THE MERGER AGREEMENT — Withholding
Taxes”
“PROPOSAL 2: ADVISORY COMPENSATION
PROPOSAL”
“DELISTING AND DEREGISTRATION
OF COMMON STOCK”
Annex A — Agreement
and Plan of Merger
Item
8. Fairness of the Transaction
(a)–(b)
Fairness; Factors Considered in Determining Fairness. The information set forth in the Proxy Statement under the following
captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight as to the Fairness of the Merger”
“SPECIAL FACTORS — Opinion
of Rothschild & Co US Inc.”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“THE MERGER AGREEMENT — Indemnification
and Insurance”
Annex C — Opinion
of Rothschild & Co US Inc.
The discussion materials prepared
by Rothschild & Co US Inc. and provided to the Special Committee, dated May 16, 2023, June 6, 2023, June 22, 2023, September 6, 2023,
September 13, 2023, September 23, 2023 and October 14, 2023, are attached hereto as Exhibit (c)(ii) through and including Exhibit (c)(viii)
and are each incorporated by reference herein.
(c)
Approval of Security Holders. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Reasons
for the Merger”
“THE MERGER AGREEMENT — Company
Stockholder Meeting; Proxy Statement”
“THE MERGER AGREEMENT — Conditions
of the Merger”
“THE SPECIAL MEETING — Record
Date and Stockholders Entitled to Vote”
“THE SPECIAL MEETING — Quorum”
“THE SPECIAL MEETING — Vote
Required”
“THE SPECIAL MEETING — Voting
Procedures”
“THE SPECIAL MEETING — How
Proxies Are Voted”
“THE SPECIAL MEETING — Revocation
of Proxies”
Annex A — Agreement
and Plan of Merger
(d)
Unaffiliated Representative. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
(e)
Approval of Directors. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
(f) Other
Offers. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Alternatives
to the Merger”
“THE MERGER AGREEMENT — No
Solicitation; Change in Board Recommendation”
Annex A — Agreement
and Plan of Merger
Item
9. Reports, Opinions, Appraisals and Negotiations
(a)–(c)
Report, Opinion or Appraisal; Preparer and Summary of the Report, Opinion or Appraisal; Availability of Documents. The information
set forth in the Proxy Statement under the following captions is incorporated herein by reference.
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Opinion
of Rothschild & Co US Inc.”
“WHERE YOU CAN FIND ADDITIONAL
INFORMATION”
Annex C — Opinion
of Rothschild & Co US Inc.
The discussion materials prepared
by Rothschild & Co US Inc. and provided to the Special Committee, dated May 16, 2023, June 6, 2023, June 22, 2023, September 6, 2023,
September 13, 2023, September 23, 2023 and October 14, 2023, are attached hereto as Exhibit (c)(ii) through and including Exhibit (c)(viii)
and are each incorporated by reference herein.
The reports, opinions or appraisals
referenced in this Item 9 are filed herewith or incorporated by reference herein and will be made available for inspection and copying
at the principal executive offices of the Company during its regular business hours by any interested holder of Shares or representative
who has been designated in writing, and copies may be obtained by requesting them in writing from the Company at the email address provided
under the caption “Where You Can Find Additional Information” in the proxy statement, which is incorporated herein
by reference.
Item
10. Source and Amount of Funds or Other Consideration
(a)-(b)
Source of Funds; Conditions. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Financing
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“THE MERGER AGREEMENT — Closing
and Effective Time of the Merger”
“THE MERGER AGREEMENT — Covenants
Regarding Conduct of Business by the Company Pending the Closing”
“THE MERGER AGREEMENT — Conditions
of the Merger”
Annex A — Agreement
and Plan of Merger
(c)
Expenses. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SPECIAL FACTORS — Fees
and Expenses”
“THE MERGER AGREEMENT — Termination
of the Merger Agreement”
“THE MERGER AGREEMENT — Termination
Fees”
“THE MERGER AGREEMENT — Fees
and Expenses”
“THE SPECIAL MEETING — Solicitation
of Proxies”
Annex A — Agreement
and Plan of Merger
(d)
Borrowed Funds.
“SPECIAL FACTORS — Financing
of the Merger”
Item
11. Interest in Securities of the Subject Company
(a) Securities
Ownership. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“THE VOTING AGREEMENT”
“THE SPECIAL MEETING — Record
Date and Stockholders Entitled to Vote”
“THE SPECIAL MEETING — Quorum”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY—Beneficial Ownership of Common Stock by Management and Directors”
Annex B — Voting
Agreement
(b)
Securities Transactions. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“THE MERGER AGREEMENT”
“THE VOTING AGREEMENT”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY — Certain Transactions in the Shares of the Company Common Stock”
Annex A — Agreement
and Plan of Merger
Annex B — Voting
Agreement
Item
12. The Solicitation or Recommendation
(d)
Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Proxy Statement under the
following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“THE MERGER AGREEMENT — Parent
Vote”
“THE VOTING AGREEMENT”
“THE SPECIAL MEETING — Record
Date and Stockholders Entitled to Vote”
“THE SPECIAL MEETING — Quorum”
“THE SPECIAL MEETING — Voting
by Company Directors, Executive Officers and Principal Securityholders”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY—Beneficial Ownership of Common Stock by Management and Directors”
Annex B — Voting
Agreement
(e)
Recommendation of Others. The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
Item
13. Financial Statements
(a)
Financial Information. The audited financial statements set forth in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2022, originally filed on March 6, 2023 (see pages F-1 through F-45 therein) and the unaudited
condensed consolidated statements of operations, condensed consolidated statements of comprehensive income, condensed consolidated balance
sheets, condensed consolidated statements of changes in mezzanine equity and shareholders’ equity and condensed consolidated statements
of cash flows set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, originally filed
on November 7, 2023 (see pages 1 through 26 therein) are incorporated herein by reference. The information set forth in the Proxy Statement
under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS —
Certain Financial Forecasts”
“SPECIAL FACTORS — Opinion
of Rothschild & Co US Inc.”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY – Selected Historical Consolidated Financial Data”
“OTHER IMPORTANT INFORMATION REGARDING
THE COMPANY – Book Value per Share”
“WHERE YOU CAN FIND ADDITIONAL
INFORMATION”
(b)
Pro Forma Information. Not Applicable.
Item
14. Persons/Assets, Retained, Employed, Compensated or Used
(a)-(b)
Solicitations or Recommendations; Employees and Corporate Assets. The information set forth in the Proxy Statement
under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND THE MERGER”
“SPECIAL FACTORS — Background
of the Merger”
“SPECIAL FACTORS — Recommendation
of the Special Committee”
“SPECIAL FACTORS — Recommendation
of the Board”
“SPECIAL FACTORS — Reasons
for the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Company for the Merger”
“SPECIAL FACTORS — Position
of the Company as to the Fairness of the Merger”
“SPECIAL FACTORS — Purpose
and Reasons of the Searchlight Entities for the Merger”
“SPECIAL FACTORS — Position
of the Searchlight Entities as to the Fairness of the Merger”
“SPECIAL FACTORS — Fees
and Expenses”
“THE MERGER AGREEMENT — Fees
and Expenses”
"THE SPECIAL MEETING"
“THE SPECIAL MEETING — Solicitation
of Proxies”
Item
15. Additional Information
(b)
The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
“SUMMARY TERM SHEET”
“SPECIAL FACTORS — Interests
of the Company’s Directors and Executive Officers in the Merger”
“SPECIAL FACTORS — Certain
Effects of the Merger”
“THE MERGER AGREEMENT — Consideration
To Be Received in the Merger”
“THE MERGER AGREEMENT — Treatment
of Company Equity Awards”
“PROPOSAL 2: ADVISORY COMPENSATION
PROPOSAL”
Annex A — Agreement
and Plan of Merger
(c)
Other Material Information. The entirety of the Proxy Statement, including all appendices thereto, is incorporated
herein by reference.
Item
16. Exhibits
The following exhibits are filed herewith:
Exhibit
No. |
Description |
(a)(2)(i) |
Preliminary Proxy Statement
of Consolidated Communications Holdings, Inc. (included in the Schedule 14A filed on November 20, 2023, and incorporated
herein by reference) (the “Preliminary Proxy Statement”). |
(a)(2)(ii) |
Form of Proxy Card (included
in the Preliminary Proxy Statement and incorporated herein by reference). |
(a)(2)(iii) |
Letter to Stockholders
(included in the Preliminary Proxy Statement and incorporated herein by reference). |
(a)(2)(iv) |
Notice of Special Meeting
of Stockholders (included in the Preliminary Proxy Statement and incorporated herein by reference). |
(a)(5)(i) |
Press Release, dated October
16, 2023 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Consolidated Communications Holdings,
Inc. with the Commission on October 16, 2023). |
(a)(5)(ii) |
Investor Presentation
(incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by Consolidated Communications Holdings, Inc.
with the Commission on October 16, 2023). |
(c)(i) |
Opinion of Rothschild
& Co US Inc., dated as of October 15, 2023 |
(c)(ii) |
Discussion materials prepared
by Rothschild & Co US Inc., dated May 16, 2023, for the Special Committee of the Board of Directors of Consolidated Communications
Holdings, Inc. |
(c)(iii) |
Discussion materials prepared
by Rothschild & Co US Inc., dated June 6, 2023, for the Special Committee of the Board of Directors of Consolidated Communications
Holdings, Inc. |
(c)(iv) |
Discussion materials prepared
by Rothschild & Co US Inc., dated June 22, 2023, for the Special Committee of the Board of Directors of Consolidated Communications
Holdings, Inc. |
(c)(v) |
Discussion
materials prepared by Rothschild & Co US Inc., dated September 6, 2023, for the Special Committee of the Board of Directors of
Consolidated Communications Holdings, Inc. |
(c)(vi) |
Discussion materials prepared
by Rothschild & Co US Inc., dated September 13, 2023, for the Special Committee of the Board of Directors of Consolidated Communications
Holdings, Inc. |
(c)(vii) |
Discussion materials prepared
by Rothschild & Co US Inc., dated September 23, 2023, for the Special Committee of the Board of Directors of Consolidated Communications
Holdings, Inc. |
(c)(viii) |
Discussion materials prepared
by Rothschild & Co US Inc., dated October 14, 2023, for the Special Committee of the Board of Directors of Consolidated Communications
Holdings, Inc. |
(c)(ix) |
Discussion materials prepared by Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, dated
March 15, 2023, for Condor Holdings LLC, Condor Merger Sub Inc., Searchlight III CVL, L.P. and Searchlight III CVL GP, LLC |
(d)(i) |
Agreement and Plan of
Merger, dated October 15, 2023, by and among Condor Holdings LLC, Condor Merger Sub Inc. and Consolidated Communications Holdings,
Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Consolidated Communications Holdings, Inc.
with the Commission on October 16, 2023). |
(d)(ii) |
Voting Agreement, dated
October 15, 2023, by and between Consolidated Communications Holdings, Inc., and Searchlight III CVL, L.P (incorporated by reference
to Exhibit 10.1 to the Current Report on Form 8-K filed by Consolidated Communications Holdings, Inc. with the Commission on October
16, 2023). |
(d)(iii) |
Interim Investors’
Agreement, dated October 15, 2023, by and between Condor Holdings LLC, Condor Merger Sub Inc., Searchlight Capital III, L.P., Searchlight
III CVL, L.P and British Columbia Investment Management Corporation. |
(d)(iv) |
Equity Commitment Letter,
dated October 15, 2023, by and between Condor Holdings LLC, Searchlight Capital III, L.P. and Searchlight Capital III PV, L.P. |
(d)(v) |
Limited Guaranty, dated
October 15, 2023, by and between Consolidated Communications Holdings, Inc., Searchlight Capital III, L.P. and Searchlight Capital
III PV, L.P. |
(d)(vi) |
Governance Agreement,
dated as of September 13, 2020, by and between Consolidated Communications Holdings, Inc. and Searchlight III CVL, L.P. (incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Consolidated Communications Holdings, Inc. with the Commission
on September 13, 2020). |
(d)(vii) |
Registration Rights Agreement,
dated as of October 2, 2020, by and between Consolidated Communications Holdings, Inc. and Searchlight III CVL, L.P. (incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Consolidated Communications Holdings, Inc. with the Commission
on October 2, 2020). |
(d)(viii) |
Waiver, dated as of November
22, 2022, made by Searchlight III CVL, L.P. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by
Consolidated Communications Holdings, Inc. with the Commission on November 22, 2022). |
(f) |
Section 262 of the DGCL
(included in the Preliminary Proxy Statement and incorporated herein by reference). |
(g) |
Not Applicable. |
107 |
Filing Fee Table. |
SIGNATURES
After due inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true, complete and correct.
| CONSOLIDATED COMMUNICATIONS HOLDINGS,
INC. |
| By: | /s/ C. Robert Udell, Jr. |
| Name: | C. Robert Udell, Jr. |
| Title: | President and Chief Executive Officer |
Date:
November 20, 2023
After due inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true, complete and correct.
| CONDOR HOLDINGS LLC |
| |
| By: Searchlight III CVL L.P., its sole member |
| By: Searchlight III CVL GP, LLC, its general partner |
| Name: | Andrew Frey |
| Title: | Authorized Person |
Date:
November 20, 2023
After due inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true, complete and correct.
| Name: | Andrew Frey |
| Title: | Authorized Person |
Date: November 20, 2023
After due inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true, complete and correct.
| SEARCHLIGHT III CVL, L.P. |
| |
| By: Searchlight III CVL GP, LLC, its general partner |
| Name: | Andrew Frey |
| Title: | Authorized Person |
Date: November 20, 2023
After due inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this statement is true, complete and correct.
| SEARCHLIGHT III CVL GP, LLC |
| Name: | Andrew Frey |
| Title: | Authorized Person |
Date: November 20, 2023
Exhibit (c)(i)
| October 15, 2023
The Special Committee of the Board of Directors
Consolidated Communications Holdings, Inc.
2116 South 17th Street
Mattoon, Illinois 61938
Members of the Special Committee:
We understand that Condor Holdings LLC (the "Parent"), Condor Merger Sub Inc., a
wholly owned subsidiary of the Parent ("Merger Sub"), and Consolidated Communications
Holdings, Inc. (the "Company"), propose to enter into an Agreement and Plan of Merger (the
"Agreement"), which provides, among other things, for the merger of Merger Sub with and into the
Company with the Company surviving the merger (the "Surviving Corporation") as a wholly owned
subsidiary of the Parent (the "Transaction"), and that, in connection with the Transaction, each
issued and outstanding share of common stock, par value $0.01 per share, of the Company (the
"Company Shares") ( other than (i) shares held by the Company as treasury stock, (ii) shares held by
Merger Sub, (iii) shares held by any direct or indirect wholly owned subsidiary of the Company or
Parent (other than Merger Sub), (iv) shares subject to Company Awards (as defined in the
Agreement), (v) shares held directly by Parent, which shares shall be automatically converted into
validly issued, fully paid and nonassessable shares of common stock, no par value per share, of the
Surviving Corporation (the "Rollover Shares") and (vi) Dissenting Shares (as defined in the
Agreement) ((i) through (vi), collectively, the "Excluded Shares")) will be cancelled and converted
into the right to receive $4.70 in cash (the "Merger Consideration"). The terms and conditions of the
Transaction are more fully set forth in the Agreement.
The special committee of the board of directors (the "Board") of the Company (such
committee, the "Special Committee") has requested our opinion as to whether the Merger
Consideration payable to the holders of Company Shares (other than the Excluded Shares) in the
Transaction pursuant to the Agreement is fair, from a financial point of view, to the Unaffiliated
Stockholders (as defined in the Agreement).
In arriving at our opinion set forth below, we have, among other things: (i) reviewed a draft
of the Agreement dated October 15, 2023; (ii) reviewed certain publicly available business and
financial information that we deemed to be generally relevant concerning the Company and the
industry in which it operates, including certain publicly available research analyst reports and the
reported price and historical trading activity for the Company Shares; (iii) compared the proposed
financial terms of the Transaction with the publicly available financial terms of certain transactions
involving companies we deemed generally relevant and the consideration received in such
transactions; (iv) compared the financial and operating performance of the Company with publicly
available information concerning certain other public companies we deemed generally relevant,
including data related to public market trading levels and implied trading multiples; (v) reviewed
certain internal financial and operating information with respect to the business, operations and
prospects of the Company, including certain financial forecasts relating to the Company prepared by
the management of the Company and approved for our use by the Special Committee (the
"Forecasts"); and (vi) performed such other financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of this opinion. In addition, we have held
discussions with certain members of the management of the Company regarding the Transaction, |
| Special Committee of the Board of Directors
Consolidated Communications Holdings, Inc.
October 15, 2023
Page 2
the past and current business operations and financial condition and prospects of the Company, the
Forecasts and certain other matters we believed necessary or appropriate to our inquiry.
In arriving at our opinion, we have, with your consent, relied upon and assumed, without
independent verification, the accuracy and completeness of all information that was publicly
available or was furnished or made available to us by the Company and its associates, affiliates and
advisors, or otherwise reviewed by or for us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or liabilities of the
Company (including, without limitation, real property owned by the Company or to which the
Company holds a leasehold interest), nor have any such valuations or appraisals been provided to us,
and we do not express any opinion as to the value of such assets or liabilities. We have not
evaluated the solvency or fair value of the Company or Parent under any state, federal or other laws
relating to bankruptcy, insolvency or similar matters. In addition, we have not assumed any
obligation to conduct any physical inspection of the properties or the facilities of the Company or
Parent. At your direction , we have used and relied upon the Forecasts for purposes of our opinion.
In relying on the Forecasts, we have assumed, at your direction and at the direction of the Company,
that they have been reasonably prepared by the management of the Company based on assumptions
reflecting the best currently available estimates and judgments by the Company's management and
by the Special Committee as to the expected future results of operations and financial condition of
the Company. We express no view as to the reasonableness of the Forecasts and the assumptions
on which they are based.
We have assumed that the transactions contemplated by the Agreement will be
consummated as contemplated in the Agreement without any waiver or amendment of any terms or
conditions, including, among other things, that the parties will comply with all material terms of the
Agreement and that in connection with the receipt of all necessary governmental, regulatory or other
approvals and consents required for the Transaction, no material delays, limitations, conditions or
restrictions will be imposed. For purposes of rendering this opinion, we have assumed that there
has not occurred any material change in the assets, financial condition, results of operations,
business or prospects of the Company since the date of the most recent financial statements and
other information, financial or otherwise, relating to the Company made available to us, and that
there is no information or any facts that would make any of the information reviewed by us
incomplete or misleading. We do not express any opinion as to any tax or other consequences that
may result from the Transaction, nor does our opinion address any legal, tax, regulatory or
accounting matters. We have relied as to all legal, tax and regulatory matters relevant to rendering
our opinion upon the assessments made by the Company and its other advisors with respect to such
issues. In arriving at our opinion, we have not taken into account any litigation, regulatory or other
proceeding that is pending or may be brought against the Company or any of its affiliates. In
addition, we have relied upon and assumed, without independent verification, that the final form of
the Agreement will not differ in any material respect from the draft of the Agreement reviewed by
us.
Our opinion is necessarily based on securities markets, economic, monetary, financial and
other general business and financial conditions as they exist and can be evaluated on, and the
information made available to us as of, the date hereof and the conditions and prospects, financial
and otherwise, of the Company as they were reflected in the information provided to us and as they |
| Special Committee of the Board of Directors
Consolidated Communications Holdings, Inc.
October 15, 2023
Page 3
were represented to us in discussions with the management of the Company. We are expressing no
opinion herein as to the price at which the Company Shares will trade at any future time. Our
opinion is limited to the fairness, from a financial point of view, to the Unaffiliated Stockholders of
the Merger Consideration payable to the holders of Company Shares (other than the Excluded
Shares) in the Transaction pursuant to the Agreement. We do not express any opinion as to the
Company's, the Board's or the Special Committee's underlying business decisions to engage in the
Transaction or the relative merits of the Transaction as compared to any alternative transaction. We
were not requested to solicit, and did not solicit, interest from other parties with respect to a
Transaction. We have not been asked to, nor do we, offer any opinion as to the terms, other than
the Merger Consideration to the extent expressly set forth herein, of the Transaction, the Agreement
or any other agreement entered into in connection with the Transaction.
We and our affiliates are engaged in a wide range of financial advisory and investment
banking activities. In addition, in the ordinary course of their asset management, merchant banking
and other business activities, our affiliates may trade in the securities of the Company, Parent,
Searchlight Capital Partners, L.P., an affiliate of Parent ("Searchlight"), British Columbia Investment
Management Corporation, an affiliate of Parent ("BCI"), and any of their respective affiliates, for
their own accounts or for the accounts of their affiliates and customers, and may at any time hold a
long or short position in such securities. We are acting as financial advisor to the Special Committee
with respect to the Transaction and will receive a fee from the Company for our services, a portion
of which is payable upon delivery of this opinion and the remaining portion of which is contingent
upon the consummation of the Transaction. In addition, the Company has agreed to reimburse
certain of our expenses and indemnify us against certain liabilities that may arise out of our
engagement. We and/or our affiliates are currently providing certain financial advisory services to
affiliates and/ or portfolio companies of Searchlight in connection with matters unrelated to the
Transaction for which we and/ or our affiliates may receive fees for our services, including
representing an affiliate of Searchlight in connection with an acquisition of Gresham House plc. We
and our affiliates may in the future provide financial services to the Company, Parent, Searchlight,
BCI and/ or their respective affiliates in the ordinary course of our businesses from time to time and
may receive fees for the rendering of such services.
This opinion is provided for the benefit of the Special Committee in connection with and
for the purpose of its evaluation of the Transaction. This opinion should not be construed as
creating any fiduciary duty on our part to any party. This opinion does not constitute a
recommendation to the Special Committee as to whether to approve the Transaction or a
recommendation as to whether or not any holder of Company Shares should vote or otherwise act
with respect to the Transaction or any other matter. In addition, the Special Committee has not
asked us to address, and this opinion does not address, (i) the fairness to, or any other consideration
of, the holders of any class of securities (other than the Unaffiliated Stockholders and then only to
the extent expressly set forth herein) or creditors or other constituencies of the Company, (ii) the
fairness to, or any other consideration of, (x) the holders of Series A Perpetual Preferred Stock, par
value $0.01 per share, of the Company or (y) the holders of the Rollover Shares or (iii) the fairness
of the amount or nature of any compensation to be paid or payable to any of the officers, directors
or employees of Parent, the Company, or any class of such persons, whether relative to the Merger
Consideration pursuant to the Agreement or otherwise. |
| Special Committee of the Board of Directors
Consolidated Communications Holdings, Inc.
October 15, 2023
Page 4
This opinion is given and speaks only as of the date hereof. It should be understood that
subsequent developments may affect this opinion and the assumptions used in preparing it, and we
do not have any obligation to update, revise, or reaffirm this opinion. This opinion has been
approved by the Global Advisory Commitment Committee of Rothschild & Co US Inc.
On the basis of and subject to the foregoing, it is our opinion that, as of the date hereof, the
Merger Consideration payable to the holders of Company Shares (other than the Excluded Shares)
in the Transaction pursuant to the Agreement is fair, from a financial point of view, to the
Unaffiliated Stockholders.
Very truly yours,
/s/ Rothschild & Co US Inc.
ROTHSCHILD & CO US INC. |
Exhibit (c)(ii)
| Preliminary and Confidential Draft
Project [ C ]
Kick-off materials
1
May 16th, 2023
Preliminary Draft |
| Preliminary Draft
Agenda
Working group introductions
1
Process discussion
3
Phase I deliverables and indicative timeline
4
Administrative items
2
Next steps
5 |
| Preliminary Draft
Special Committee working group
Special Committee working group
Management team (“Management”) For reference only
◼ Bob Udell, President, CEO and Director
◼ Fred Graffam, EVP & CFO
◼ Gaurav Juneja, President of Consumer
◼ John Lunny, CTO
◼ Dan Stoll, President of Commercial-Carrier
◼ Jennifer Spaude, SVP of Corporate Communications & IR
◼ Garrett Van Osdell, Chief Legal Officer & Corporate Secretary
◼ Gabe Waggoner, EVP of Operations
◼ Robert Currey, Chairman of Board
◼ Thomas Gerke, Director
◼ Roger Moore, Director
◼ Maribeth Rahe, Director
Special Committee (“SC”)
◼ Jonathan Herbst, Partner & Head of North America
Media & Telecommunications
◼ James Ben, Partner & Head of North America M&A
◼ Michael Speller, Partner & Head of North America Debt
Advisory
◼ Ben Goldenberg, Director
◼ Charles Huyghues-Despointes, Director
◼ Keith Knobelauch, Vice President
◼ Marcos Robertson-Lavalle, Associate
◼ Patrick Cooney, Associate
◼ Derek Cunningham, Associate
◼ Austin Gausditis, Analyst
◼ Adrian Scott, Analyst
◼ Jamie Lynch, Analyst
◼ Aimee Hou, Analyst
ProjectSeashoreSupport@Rothschildandco.com
Rothschild & Co (“R&Co”)
◼ Robert Townsend, Partner and Co-Head of the Global M&A Practice
◼ Andrew Elken, Partner
◼ Alexander Greenberg, Associate
◼ Christopher Doherty, Associate
Cravath, Swaine & Moore (“Cravath”)
1 Working group introductions
3 |
| Preliminary Draft
Administrative items
4
2 Administrative items
S M T W Th F Sa
30 1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31 1 2 3
S M T W Th F Sa
28 29 30 31 1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 1
S M T W Th F Sa
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31 1 2 3 4 5
S M T W Th F Sa
30 31 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31 1 2
May June July August
*
Key administrative items upon project kickoff
◼ Establish project name / confidential naming considerations
□ Project Seashore
□ Condor, Seagull, Blue Jay
◼ Establish internal communications protocols
□ Among SC / R&Co / Cravath
□ With Management
□ With other professionals
◼ Establish external communications protocols
□ With stakeholders (shareholders / creditors)
□ Interaction with interested party (“IP”)
□ Inbounds / interaction from 3rd parties
◼ Establish SC meeting cadence
□ Weekly update calls
□ Key deliverables dates (face-to-face meetings)
Project Kickoff U.S. Holidays
*
Weekly touchpoints Q2 earnings (est., TBC) |
| Preliminary Draft
Situation update
5
Review of Special Committee charter and objectives
Debrief on discussions with IP to date (review of communication, key touchpoints, etc.), if any
Other shareholder feedback, if any
Update on inbound inquiry or interaction, if any
Update on creditor discussions or interaction, if any
2 Administrative items
1
2
3
4
5 |
| Preliminary Draft
◼ Ensure full understanding of
proposal
◼ Develop an understanding of
management’s business plan
◼ Determine standalone / intrinsic
valuation of Company
◼ Shareholder value vs. proposal
◼ Determine required regulatory
approvals
◼ Establish contact with IP to clarify proposed terms of proposal
◼ Review of management plan, model and forecast assumptions / sensitivities
◼ Management meeting / Q&A
◼ Benchmarking against peers / industry performance
◼ Capital needs for achievement of current Management plan / capital
requirements to accelerate build plan
◼ Traditional valuation methodologies
Evaluation of
proposal /
standalone value
after evaluation of
proposal
Assessment of
alternatives
◼ Alternative potential buyer universe (ability to transact, timing)
◼ Viability of potential asset sales (separability, timing and tax leakage)
◼ Capital markets assessments (ability to secure committed financing to
refinance or solicit CoC waiver consent)
◼ Regulatory considerations
◼ Analyze potential alternative
transactions / strategies
◼ Factors impacting probability of
success
B
Special Committee process overview
6
Key objectives Key workstreams
A
Determine
appropriate
response to IP
◼ Develop appropriate
communication strategy contingent
on outcome of
previous steps
◼ Process overlay, establish ground rules
Step 2
◼ Prepare formal response materials
◼ Determine best path for Special
Committee to pursue Execution ◼ Establish process strategy and key milestones
Step 3 Step 1
3 Process discussion |
| Preliminary Draft
7
Business plan assessment – work plan
Process discussion
Capital requirements of management plan
◼ Assess runway to fund its current business plan (and potential
variations to the plan)
◼ Consider the timing of capex spend and how this may impact
long-term plan, future funding requirements, etc.
◼ Quantify the amount of incremental capital the business would
need to fund the current plan
◼ Evaluate how accessible the revolving credit facility may be
given existing debt covenants
Fiber deployment / legacy business strategy
◼ Key revenue growth drivers for business
□ Residential / commercial fiber build plan, penetration rates
and unit economics
□ Carrier revenue plan and long-term outlook
◼ Assessment of profitability and long-term outlook for target
EBITDA margins
◼ Capex strategy and market focus
Analysis of business plan / Model review
3
◼ Historical operating KPIs / financial results
◼ Long-term business plan
◼ Budget vs. actuals
◼ Detailed 2023 / 2024 budget
◼ Summary of fiber deployment strategy and progress to date
◼ Market penetration summary
◼ Strategic operations materials (i.e., headcount plans, market
focuses, etc.)
◼ Commercial diligence / industry reports (e.g., Altman report,
etc.)
◼ Board presentations related to business plan
◼ Details on funding of pension / OPEB
◼ Preferred stock calculation (if sold)
□ Call protection
□ Breakage calculation
◼ Pro forma capitalization table
◼ Lender register (from admin agent) and bondholders list (via
an information agent)
Formal diligence list to be shared following today’s meeting
Key diligence items |
| Preliminary Draft
Assessment of alternatives – Preliminary universe
8
Alternative Key points
Status quo /
remain
publicly
traded
company
Execute on
plan
◼ Intrinsic valuation and discounted future share price
◼ Ability to self-sustain without supplemental financing
◼ Upside / downside risks to achievement of forecast plan
Potential
monetization
of assets
◼ Near-term capital to focus on higher growth buildouts / accelerated build
◼ Potential balance sheet derisking
◼ Execution, valuation, timing and tax leakage to be evaluated
Pursue transaction
with IP
◼ Value of proposal vs. intrinsic value of standalone plan
◼ Analyze how to best create negotiating leverage
◼ Cost-benefit of transaction risk vs. plan execution risk
◼ Timing considerations
Pursue alternative sale
transaction / combination
◼ Buyer universe – potential interest / strategic value, ability to pay, timing
◼ Timing considerations vs. transaction with IP
◼ Feasibility of CoC waiver consent / new debt pricing and leverage capacity
1
3
2
Process discussion
a
b
3 |
| Preliminary Draft
Month May June
Week 1 2 3 4
Day 15 16 17 18 19 22 23 24 25 26 29 30 31 1 2 5 6 7 8 9
General
Weekly update calls
1a Analysis of business plan / model review
1a.1 Kick-off
1a.2 Share initial R&Co diligence list
1a.3 Receive / review initial management forecasts
1a.4 Management Q&A sessions
1a.5 Detailed benchmarking of plan
1a.6 Plan sensitivities
1a.7 Capital structure analysis
1a.8 Iteration of valuation considerations
1a.9 Presentation of initial valuation findings to Committee
1b Assessment of alternatives
1b.1 Review of status quo based on concurrent work in Step 1a
1b.2 Capital structure analysis / evaluate potential consent solicitation
1b.3 Evaluation of potential asset sales
1b.4 Assessment of potential strategic buyers (firepower, synergies, rationale)
1b.5 Assessment of potential financial buyers (ability to pay, returns analysis)
1b.6 Presentation of findings to Committee
2 Determine appropriate response to IP
2.1 Advisor initial outreach to IP on behalf of Company
2.2 Assessment of risk factors
2.3 Deliberation on potential strategic alternatives
2.4 Determine formal response strategy to IP
3 Execution
3.1 Provide formal response to IP
3.2 Pursue alternatives, if SC determines to do so
3.3 Consider external communications updates, if needed
Phase I deliverables and indicative timeline
Preliminary process timeline
9
Key action items and targeted timing to ensure an informed formal response is reached
4 |
| Preliminary Draft
Receive and review financial information from Management
2
Schedule in-person meeting with Management to review information received and
engage in Q&A
3
Share initial diligence list with Management
1
Schedule meeting with regulatory counsel
4
Next steps
10
5 Next steps
Determine appropriate treatment of preferred equity under potential change of control
5 |
| 11
Appendix |
| Confidential
Preliminary Draft
Pre-13D filing price Unaffected price
Interested Party
proposal Current price
Date Metric M arch 7th, 2022 April 12th, 2023 April 13th, 2023 M ay 15th, 2023
Price $4.71 $2.76 $4.00 $3.67
% difference to 30-trading day VWAP $3.53 n.a. n.a. 52% 4%
% difference to 60-trading day VWAP $3.21 n.a. n.a. 25% 14%
% difference to 90-trading day VWAP $3.56 n.a. n.a. 12% 3%
% difference to 52-week high $8.49 n.a. n.a. (53%) (57%)
% difference to unaffected price $2.76 n.a. n.a. 45% 33%
(x) Fully diluted shares outstanding 116 117 120 120
Implied equity value $544 $324 $481 $441
(+) Gross debt2
2,175 2,186 2,195 2,195
(-) Cash (100) (326) (248) (248)
(-) Short term investments (111) (88) (88) (88)
(+) Preferred equity (at liquidation preference)3
437 477 488 488
(+) Non-controlling interest 7 8 8 8
(-) Investments in affiliates (110) (10) (9) (9)
(+) Net underfunded pension4
163 95 95 95
Implied enterprise value $3,006 $2,665 $2,921 $2,881
memo: Value of equity not owned by Interested Party n.a. $215 $324 $297
Implied EV / NTM adj. EBITDA 5
7.2x 8.4x 9.3x 9.1x
Implied EV / FY+1 adj. EBITDA 6
7.1x 7.6x 8.3x 8.2x
Company’s valuation in context
12
IP proposal implies 9.3x 2023E EBITDA and 8.3x 2024E EBITDA1
Sources Company filings, FactSet
Notes
1 Assumes consensus EBITDA estimates as of 5/15/2023
2 Gross debt includes finance leases
3 Liquidation preference inclusive of accumulated PIK interest
4 Net of illustrative deferred tax asset
5 Denotes EV / ’22E EBITDA for “March ’22 13D filing,” EV / ’23E
EBITDA for other scenarios
6 Denotes EV / ’23E EBITDA for “March ’22 13D filing,” EV / ’24E
EBITDA for other scenarios
Implied valuation at key transaction milestones (in USDm, except for share price) |
| Preliminary Draft
13
Disclaimer
1. Section name
The accompanying materials were compiled on a confidential basis by Rothschild & Co US Inc. (“Rothschild & Co”) for the use and benefit of the Special Committee (the “Special Committee”) of
the Board of Directors of Consolidated Communications Holdings, Inc. (the “Company”) solely in connection with its evaluation of the transaction referred to herein.
Neither Rothschild & Co nor any of its affiliates, nor any of its or their respective officers, directors, employees, advisors, agents or representatives, represents or warrants as to the accuracy or
completeness of any of the materials set forth herein. Nothing contained in the accompanying materials is, or shall be relied upon as, a promise or representation as to the past, present or
future.
It should be understood that these materials, including any valuations and/or estimates or projections contained in the accompanying materials, were prepared or derived from information
supplied by the Company or derived from public sources, without any independent verification by Rothschild & Co. This information, including any valuations, estimates or projections, involves
numerous and significant assumptions and subjective determinations by the Company’s management and other sources, which may or may not be correct, although the Company has
represented that the materials are reasonably based. Rothschild & Co assumes no responsibility for independent verification of such information and has relied on such information being
complete and accurate in all material respects. Accordingly, no representation or warranty, express or implied, can be made or is made by Rothschild & Co as to the accuracy or completeness
of any such information or the achievability of any such valuations and/or estimates or projections. To the extent such information includes any estimates or projections of future financial
performance, Rothschild & Co has assumed that such estimates or projections have been reasonably prepared on bases reflecting the best currently available estimates and judgments of
management of the Company (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). The accompanying material does not represent an
opinion as to the prices at which the Company, or any interests therein, actually would be acquired or sold.
Except where otherwise indicated, this presentation speaks as of the date hereof and is necessarily based upon the information available to Rothschild & Co and financial, stock market and
other conditions and circumstances existing and disclosed to Rothschild & Co as of the date hereof. Rothschild & Co does not have any obligation to update, review or reaffirm these materials.
The presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Rothschild & Co. Under no circumstances should the delivery
of this presentation imply that any information or analyses included in this presentation would be the same if made as of any other date.
These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. No single analysis
contained herein can be deemed more or less important than any other analysis and these analyses must be considered, in their totality, with the oral briefing provided by Rothschild & Co.
Prior to entering into any transaction, the Special Committee should determine, without reliance on Rothschild & Co or its affiliates, the economic risks and merits as well as the legal, tax and
accounting characterizations and consequences of any such transaction. In this regard, by accepting these materials, the Special Committee acknowledges that Rothschild & Co is not in the
business of providing (and the Special Committee is not relying on Rothschild & Co for) legal, tax or accounting advice, and the Special Committee should receive (and rely on) separate and
qualified legal, tax and accounting advice. These materials do not constitute an offer or solicitation to sell or purchase any securities.
Rothschild & Co is not acting in any capacity as a fiduciary or agent of the Special Committee, the Board of Directors or the Company.
In the ordinary course of their asset management, merchant banking and other business activities, affiliates of Rothschild & Co may at any time hold long or short positions, and may trade or
otherwise effect transactions, for their own accounts or the accounts of their clients in equity, debt or other securities (or related derivative securities) or financial instruments of the Company or
any of its affiliates or any other company that may be involved in a transaction.
THIS PRESENTATION IS CONFIDENTIAL AND WAS NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR FILING THEREOF UNDER STATE OR FEDERAL SECURITIES LAWS
OR OTHERWISE. THIS PRESENTATION MAY NOT BE COPIED BY, OR DISCLOSED OR MADE AVAILABLE TO, ANY PERSON WITHOUT THE PRIOR WRITTEN APPROVAL OF
Rothschild & Co.
THIS PRESENTATION IS NOT INTENDED TO BE USED OR RELIED UPON, AND SHOULD NOT BE USED OR RELIED UPON, BY ANY PERSON OTHER THAN THE SPECIAL
COMMITTEE AND MAY NOT BE USED BY ANY OTHER PERSON WITHOUT PRIOR WRITTEN APPROVAL OF Rothschild & Co.
7. NEXT STEPS |
Exhibit (c)(iii)
| DRAFT
All numbers and references
herein are highly preliminary
and subject to material
refinement
PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
Project Seashore
Discussion materials
1
6 June 2023 |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
Topics for discussion
2
Key Special Committee confirmations
Potential business plan sensitivities
C
Terminal cash flow assumptions
B
May 70% Plan financing considerations
A |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
Key items for the Special Committee to confirm
3
◼ Business plan for basis of analysis
□ Confirmation of capital need assumptions (if any)
◼ Confirmation of terminal assumptions
◼ Confirmation of NOL / tax assumptions
◼ Direction on model sensitivities to run |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
1 of 2
Net leverage1
Considerations for raising capital to fund May 70% Build Plan
4
◼ May 70% Build Plan has ~$400m total shortfall in capital by 2026
◼ Current revolver covenants limit ability to use leverage capacity to fund
shortfall
□ Model projects revolver fully drawn up to 35% springing covenant
level ($79m) by year-end 2023
□ Incurrence of debt above 35% revolver draw is subject to a 6.35x
leverage covenant
□ Based on EBITDA / cash generation profile, additional leverage
capacity below 6.35x covenant level unavailable until late 2024 /
early 2025
◼ Management has guided that ~$250 - 275m of new capital would be
needed to bridge to the point at which additional revolver capacity is
available to fund the remainder of the ~$400m shortfall
◼ Seagull approval rights on new capital raised require careful
consideration and management
1. SECTION NAME A May 70% Plan financing considerations
Situation overview May 70% Plan liquidity and leverage overview
Total liquidity
Net leverage1
Total liquidity
Ending cash balance Ending revolver capacity New capital raise
A
B
A
PF for illustrative capital raise at Dec-23E
B
Source: May 70% LRP
Note:
1. Defined as debt (gross of issuance costs) including finance leases less cash on hand ÷ LTM EBITDA
336
27 10 10 10
21
275
241 241
227
41 30
241
577 543 237 51 40 262
4.9x 5.8x 6.1x 5.3x 4.2x 3.2x
Mar-23A Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E Chart Title
336
28
(201)
(385) (387)
(161)
241
79
-- --
577 107 (201) (385) (387) (161)
4.9x 6.7x 6.9x 5.9x 4.7x 3.6x
Mar-23A Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E Chart Title |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
$m 2023E 2024E 2025E 2026E 2027E
Seagull preferred (at liquidation preference) $521 $569 $621 $678 $741
Illustrative new preferred instrument (25% IRR) 275 344 430 537 671
Total preferred equity (pro forma) 796 913 1,051 1,216 1,412
(+) Net debt 2,146 2,448 2,614 2,611 2,373
Memo: xLTM EBITDA 6.7x 6.9x 5.9x 4.7x 3.6x
Net debt including preferred equity 2,942 3,361 3,665 3,827 3,785
Memo: xLTM EBITDA 9.2x 9.4x 8.3x 6.8x 5.7x
$m, except per share
Illustrative capital requirement $275
Undisturbed share price $2.76
Illustrative offering discount 20.0%
Implied offering price $2.30
Implied shares issued 119.6
% of current basic shares outstanding 102.5%
May 70% Plan financing considerations
Considerations for raising capital to fund May 70% Build Plan
5
2 of 2
Source: May 70% LRP
Note:
1. Defined as debt (gross of issuance costs)
including finance leases less cash
A
◼ Limited recent precedents in US public markets
◼ Issued at meaningful discount to trading price
◼ Practical requirement to have Seagull’s participation in order to underwrite
◼ Highly bespoke instruments with range of potential structures / terms
◼ Likely needs to be structured as junior to Seagull preferred equity
◼ Based on capital structure, investors would likely target 20 - 25% total return
through a convertible preferred instrument
□ PIK interest (10 - 15%) for portion or all of instrument life
□ Conversion to common equity at a premium (10 - 20%) after specified period
□ Make-whole if called within certain period (~3 years)
□ Put rights for new investor (cash redemption or mandatory conversion)
□ Potential governance considerations
◼ Structuring may require management of change-of-control terms on current
debt (dependent on size of conversion)
Negotiated senior equity instrument
New capital:
illustrative options
Rights issue
Public market announcement of need for liquidity may result in negative share
price reaction, impacting the cost / terms of external capital
Illustration Illustration |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
$m Terminal
Total revenue $1,525
Adj. EBITDA 741
(-) Stock-based compensation (10)
Adj. EBITDA (less SBC) $731
(-) One-time items (15)
(-) D&A
EBIT 716
(-) Tax at marginal rate (25%) (179)
NOPAT 537
(+) D&A
(-) CapEx
(+ / -) Source / (use) of NWC (4)
Unlevered FCF $533
Self Funding LRP
$m 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Total sales $1,119 $1,141 $1,205 $1,282 $1,332 $1,388 $1,432 $1,479 $1,525
% growth 1.9% 5.6% 6.4% 3.9% 4.2% 3.2% 3.3% 3.1%
Adj. EBITDA 321 362 428 522 597 647 683 718 741
% margin 28.6% 31.7% 35.5% 40.7% 44.8% 46.7% 47.6% 48.5% 48.6%
CapEx
Build 168 93 55 62 73 63 63 63 54
Success-based 175 158 167 148 132 139 141 144 141
Obligatory 88 86 79 73 69 75 75 75 75
Other 29 15 – – – – – – –
Total CapEx 460 352 301 283 274 277 280 283 270
CapEx % of sales
Build 15.0% 8.2% 4.6% 4.8% 5.5% 4.6% 4.4% 4.3% 3.6%
Success-based 15.6% 13.8% 13.9% 11.6% 9.9% 10.0% 9.9% 9.8% 9.3%
Obligatory 7.8% 7.5% 6.5% 5.7% 5.2% 5.4% 5.2% 5.1% 4.9%
Other 2.6% 1.3% – – – – – – –
Total CapEx 41.1% 30.9% 25.0% 22.1% 20.6% 20.0% 19.5% 19.1% 17.7%
Discussion of terminal period CapEx assumptions
6
Source: Self Funding LRP
Note:
1. Includes Core Network Upgrade and Digital Transformation CapEx
1. SECTION NAME B Terminal cash flow assumptions
Business plan metrics Illustration of terminal period
Determination of “steady-state” CapEx
will be key in evaluating the value of
Condor in perpetuity
Memo: see appendix for peer CapEx benchmarking over time
1
1 |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
Illustrative business plan value drivers to sensitize
7
1. SECTION NAME C Potential business plan sensitivities
Illustrative metric Self Funding LRP assumption
Self Funding LRP metric
2023E 2027E 2031E
Terminal residential fiber penetration rate
◼ Residential fiber build cohort terminal penetration
rates of 40% by year 6 16.8% 33.7% 35.7%
Enterprise & carrier sales (CAGR since 2022A)
◼ Enterprise & carrier sales recover to 2019A levels
by 2031E; represents CAGR over this period of
0.2% p.a.
(2.6%) 0.4% 1.4%
Non-video COGS (% of sales)
◼ 150bps improvement vs. 2023E in 2024E with
subsequent 50bps p.a. improvements from 2025 - 27E 15.0% 12.0% 12.0%
EBITDA margin
◼ Margin expansion as fiber build-out leads to improved
operating leverage and decreased marketing spend
per subscriber
28.6% 44.8% 48.6%
Terminal CapEx intensity (% of sales)
◼ CapEx costs based on extrapolation of current
construction cost and maintenance expectations 41.1% 20.6% 17.7%
Source: Self Funding LRP |
| Appendix
8 |
| PRELIMINARY, ILLUSTRATIVE DRAFT – FOR REFERENCE ONLY AND SUBJECT TO MATERIAL CHANGE
19%
37%
26% 25%
24% 23%
21% 19% 18%
17%
16%
13% 13%
Avg. of
peers: 21%
Avg. of peers
adj.: 19%
–
5%
10%
15%
20%
25%
30%
35%
40%
Chart Title
9
Average CapEx / Revenue % (2008 – 2022)
Peer CapEx benchmarking
Source: Company filings
Notes:
1. Average excludes Shentel and TDS (Telecom segment)
2. Average calculated from 2008 through 2022
3. Average calculated from 2015 through 2022
4. Average calculated from 2008 through 2020
5. Average calculated from 2016 through 2022
6. TDS (Telecom segment) excludes HMS business segment in historical periods
7. ATN International excludes energy business segment in historical periods
8. Cincinnati Bell based on its Network segment financials (data, video, voice and other, as well as Entertainment and Communications and Wireline) in historical periods
B Terminal cash flow assumptions
(Telecom
segment)
(Cable)
5
2
4
3
Condor
1
6 7 8 |
Exhibit (c)(iv)
| PRELIMINARY DRAFT
Project Seashore
Special Committee materials
June 22nd, 2023
1 |
| PRELIMINARY DRAFT
The accompanying materials were compiled on a confidential basis by Rothschild & Co US Inc. (“Rothschild & Co”) for the use and benefit of the Special Committee (the “Special Committee”) of
the Board of Directors of Consolidated Communications Holdings, Inc. (the “Company” or “Condor”) solely in connection with its evaluation of the transaction referred to herein.
Neither Rothschild & Co nor any of its affiliates, nor any of its or their respective officers, directors, employees, advisors, agents or representatives, represents or warrants as to the accuracy or
completeness of any of the materials set forth herein. Nothing contained in the accompanying materials is, or shall be relied upon as, a promise or representation as to the past, present or
future.
It should be understood that these materials, including any valuations and/or estimates or projections contained in the accompanying materials, were prepared or derived from information
supplied by the Company or derived from public sources, without any independent verification by Rothschild & Co. This information, including any valuations, estimates or projections, involves
numerous and significant assumptions and subjective determinations by the Company’s management and other sources, which may or may not be correct, although the Company has
represented that the materials are reasonably based. Rothschild & Co assumes no responsibility for independent verification of such information and has relied on such information being
complete and accurate in all material respects. Accordingly, no representation or warranty, express or implied, can be made or is made by Rothschild & Co as to the accuracy or completeness
of any such information or the achievability of any such valuations and/or estimates or projections. To the extent such information includes any estimates or projections of future financial
performance, Rothschild & Co has assumed that such estimates or projections have been reasonably prepared on bases reflecting the best currently available estimates and judgments of
management of the Company (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). The accompanying material does not represent an
opinion as to the prices at which the Company, or any interests therein, actually would be acquired or sold.
Except where otherwise indicated, this presentation speaks as of the date hereof and is necessarily based upon the information available to Rothschild & Co and financial, stock market and
other conditions and circumstances existing and disclosed to Rothschild & Co as of the date hereof. Rothschild & Co does not have any obligation to update, review or reaffirm these materials.
The presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Rothschild & Co. Under no circumstances should the delivery
of this presentation imply that any information or analyses included in this presentation would be the same if made as of any other date.
These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. No single analysis
contained herein can be deemed more or less important than any other analysis and these analyses must be considered, in their totality, with the oral briefing provided by Rothschild & Co.
Prior to entering into any transaction, the Special Committee should determine, without reliance on Rothschild & Co or its affiliates, the economic risks and merits as well as the legal, tax and
accounting characterizations and consequences of any such transaction. In this regard, by accepting these materials, the Special Committee acknowledges that Rothschild & Co is not in the
business of providing (and the Special Committee is not relying on Rothschild & Co for) legal, tax or accounting advice, and the Special Committee should receive (and rely on) separate and
qualified legal, tax and accounting advice. These materials do not constitute an offer or solicitation to sell or purchase any securities.
Rothschild & Co is not acting in any capacity as a fiduciary or agent of the Special Committee, the Board of Directors or the Company.
In the ordinary course of their asset management, merchant banking and other business activities, affiliates of Rothschild & Co may at any time hold long or short positions, and may trade or
otherwise effect transactions, for their own accounts or the accounts of their clients in equity, debt or other securities (or related derivative securities) or financial instruments of the Company or
any of its affiliates or any other company that may be involved in a transaction.
THIS PRESENTATION IS CONFIDENTIAL AND WAS NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR FILING THEREOF UNDER STATE OR FEDERAL SECURITIES LAWS
OR OTHERWISE. THIS PRESENTATION MAY NOT BE COPIED BY, OR DISCLOSED OR MADE AVAILABLE TO, ANY PERSON WITHOUT THE PRIOR WRITTEN APPROVAL OF
Rothschild & Co.
THIS PRESENTATION IS NOT INTENDED TO BE USED OR RELIED UPON, AND SHOULD NOT BE USED OR RELIED UPON, BY ANY PERSON OTHER THAN THE SPECIAL
COMMITTEE AND MAY NOT BE USED BY ANY OTHER PERSON WITHOUT PRIOR WRITTEN APPROVAL OF Rothschild & Co.
Disclaimer
1. Section name
2 |
| PRELIMINARY DRAFT
Contents
Situation overview
Overview of business plan
Preliminary valuation perspectives
Valuation detail
Alternative considerations
Appendix
Additional valuation support
Other supporting materials
1
2
3
4
5
4
10
16
25
31
46
A
B
47
54
3 |
| Situation overview
1
4 |
| PRELIMINARY DRAFT
◼ On April 12, 2023, Seagull and Blue Jay submitted a non-binding proposal at $4.00 / share to take Condor private
◼ Rothschild & Co (“R&Co”) was engaged as financial advisor to the Special Committee of the Board of Condor on May 16, 2023
◼ During May and June, R&Co and the Special Committee were provided access to Condor’s internal operating and financial information
and to Condor’s Management team for the purposes of performing a due diligence review of Condor, its recent performance and outlook
including Management’s Standalone Long-Range Plan (“Standalone LRP”)
◼ For purposes of evaluating Condor’s business and performing preliminary valuation analysis, the Special Committee instructed R&Co to
use the Standalone LRP
◼ Assumptions for the Standalone LRP were based on Management’s current view of business conditions and outlook as of June 2023
◼ Based on projected business performance and capital commitments to certain inventory purchases and Rural Digital Opportunity Fund (“RDOF”)
related capital spend, the Standalone LRP contemplates a significant reduction in the pace at which Condor overbuilds fiber in order to maintain
adequate liquidity
◼ Certain non-core analyses utilize additional illustrative cases:
□ Illustrative Buyer Plan (Including Pre-Closing Capital) – assumes Condor Management’s continued acceleration of its fiber build achieving
70% penetration by 2026 – this case requires additional capital by year end 2023 to fully fund
□ Illustrative Buyer Plan (No Pre-Closing Capital) – for the purposes of evaluating a buyer’s ability to pay, assumes a build rate in line with
the Standalone LRP through an illustrative transaction close date of 12/31/24, with assumed reacceleration of the build in line with the
Illustrative Buyer Plan (No Pre-Closing Capital) (and related capital requirements) post-close
◼ In evaluating the Standalone LRP, R&Co has observed:
◼ Standalone LRP reflects a build-out cadence that allows Condor to remain within its current liquidity constraints with minimal cushion over the
next few years (reaching a low point in liquidity of $12m in 2025)
◼ Given limited liquidity, minor fluctuations to the Standalone LRP would result in liquidity issues unless the fiber build-out is slowed further,
subscriber growth is pursued less aggressively or paused, and / or new outside capital is injected (which may have a dilutive impact to current
shareholders)
◼ Conversely, acceleration of the plan is limited by liquidity over the next 5 years without raising external capital or outperformance on penetration
/ profitability in a challenging market environment
◼ R&Co has relied on the Standalone LRP projections for the analyses laid out on subsequent pages of these materials. While certain
sensitivity analyses have been performed to assess the valuation impact of changes to certain assumptions underlying the Standalone
LRP, these analyses do not consider the resulting degradation of liquidity in situations where assumptions in the Standalone LRP are
not met or the potential valuation impact of a liquidity shortfall
3
2
1
4
Situation overview
1. SITUATION OVERVIEW 1 Situation overview
5
6
5 |
| PRELIMINARY DRAFT
Seagull proposal: key terms
Source: Amended Form SC 13D dated April 13, 2023
Notes:
1. Based on 39.3m shares held by Seagull per Amended Form SC 13D dated April 13, 2023 and Condor Management-provided FDSO of 118.7m as of May 31, 2023
2. Unaffected date is April 12, 2023, the last trading day prior to public announcement of Seagull’s non-binding proposal
3. Seagull-calculated VWAP based on trading days; premium to 1-month calendar day VWAP as of April 12, 2023 is ~61%
4. Share price as of June 16, 2023
On April 12, 2023, Seagull submitted a non-binding proposal at $4.00 / share to take
Condor private
Seagull proposal
and market
reaction
◼ Condor’s Board of Directors received a non-binding proposal from Seagull / Blue Jay to acquire the remaining ~67%1
equity stake of the Company’s outstanding shares for $4.00 / share
□ The $4.00 proposal price represented a ~45% premium to the unaffected price2 of $2.76 and, per the letter, a 52% premium
to 30-trading day VWAP3
□ The stock immediately reacted with a 1-day stock price increase of ~40% (increased from $2.76 to $3.83)
□ Current share price of $3.704
Form of
consideration /
funding
◼ All cash transaction
◼ Transaction funded with equity; stated no need for debt financing as existing capital structure will remain in place
under continued Seagull ownership (i.e., Seagull is a “Permitted Holder” under the terms of the credit agreement)
□ Blue Jay, a significant LP in Seagull’s fund, intends to contribute a meaningful amount of equity into the transaction
□ Seagull has subsequently verbally indicated that it will fully backstop the equity funding in the event Blue Jay does
not invest
Other proposal
terms /
conditions
◼ Seagull conditioned that the proposal be:
□ Considered and recommended by an independent Special Committee, advised by independent legal and financial advisors
□ Approved by holders of the majority of outstanding common shares not owned by Seagull or Blue Jay
◼ Seagull stated that it is not interested in selling its shares or in an alternative change of control transaction,
and would not vote in favor of any alternative sale, merger or similar transaction
1 Situation overview
6 |
| PRELIMINARY DRAFT
Unaffected Seagull
(4/12/2023) Proposal
Illustrative share price $2.76 $4.00
(×) Fully diluted shares outstanding 118.7 118.7
Implied Condor equity value $328 $475
(+) Total debt 2,195 2,195
(+) Net, tax-effected PBO and OPEB 95 95
(-) Cash and cash equivalents (336) (336)
(+) Preferred stock (at liquidation pref.) 488 488
(-) Other adjustments (1) (1)
Implied enterprise value $2,767 $2,914
Seagull proposal in context: Side-by-side vs. Unaffected1
Sources: Standalone LRP, company filings, press releases, FactSet (as of June 16, 2023 and April 12, 2023)
Notes:
1. Unaffected date is April 12, 2023, the last trading day prior to public announcement of Seagull’s
non-binding proposal
2. Balance sheet as of March 31, 2023 as per Condor Management; Condor Management-provided
FDSO of 118.7m as of May 31, 2023
3. Per proposal in Seagull’s amended 13-D dated April 13, 2023
4. Calendar day VWAP; as of April 12, 2023
5. Tax-effected at 26% tax rate (tax rate per Condor Management)
6. Other adjustments include NCI and Investments
7. Based on Standalone LRP; LTM on like-for-like basis to go-forward business per Condor Management
pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
8. Consensus Adj. EBITDA based on FactSet median consensus estimates
Key assumptions
Implied multiples
2,3
Implied premia
6
5
Unaffected Seagull
(4/12/2023) Proposal
Unaffected (April 12, 2023; $2.76) n.a. 45%
Current (June 16, 2023; $3.70) (25%) 8%
1-month VWAP ($2.49) 11% 61%
2-month VWAP ($2.86) (4%) 40%
3-month VWAP ($3.07) (10%) 30%
6-month VWAP ($3.54) (22%) 13%
52-week high (June 24, 2022; $7.50) (63%) (47%)
52-week low (March 24, 2023; $2.15) 28% 86%
2
4
4
4
4
1 Situation overview
7
Standalone LRP
EV / LTM Mar-23PF Adj. EBITDA 7.9x 8.3x
EV / 2023E Adj. EBITDA 8.6x 9.1x
EV / 2024E Adj. EBITDA 7.6x 8.1x
Consensus
EV / 2023E Adj. EBITDA 8.7x 9.2x
EV / 2024E Adj. EBITDA 8.2x 8.7x
7
8 |
| PRELIMINARY DRAFT
$11.65
$3.70
6.2x
8.8x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23 EV / NTM EBITDA multiple (x) Stock price ($ actuals)
Stock price Q/K filed Seagull events Divestitures EV / NTM EBITDA
Condor 5-year stock price and valuation multiple1 history
Condor historical trading performance
Sources: Company filings, press releases, FactSet (as of June 16, 2023)
Note:
1. Fully diluted shares include outstanding shares and PSAs
April 12, 2023
Seagull submits and
publicly announces
going-private
proposal
March 7, 2022:
Seagull publicly
discloses interest in
increasing ownership
/ acquiring Condor
October 2, 2020:
Seagull closed on
stage one investment
September 14, 2020:
Condor announced
strategic investment
from Seagull
December 7, 2021:
Seagull closed on
stage two investment
Divestiture announcements:
◆ Sep-21: Sale of Ohio assets
◆ Mar-22: Sale of Kansas City assets
◆ Aug-22: Sale of Wireless Partnership
1 Situation overview
8 |
| PRELIMINARY DRAFT
◼ Their view that $4.00 per share price is insufficient
◼ Their view, based on past public commentary of Management, that Condor is "fully-funded” to meet needs of its publicly-stated business
plan objectives
◼ Their belief that Condor is “significantly undervalued”
◼ No interest by them in selling shares at or near the Seagull proposal
◼ Their view that Condor is at an inflection point in value creation given large capital spend over last few years not yet reflected in performance
of business
◼ Their view that asset value supports a stock price well in excess of the Seagull proposal and any recent / longer-term average share prices
1
2
3
4
5
6
Preliminary Condor shareholder feedback
1. SITUATION OVERVIEW
As requested by the Special Committee, Rothschild & Co has engaged in a preliminary, information-gathering discussion with select
shareholders who had previously attempted to contact the Special Committee
Conducted two calls, a Special Committee member participated in one discussion and Rothschild & Co had the second call without
participation of the Special Committee; third call is pending
◼ Rothschild & Co and the Special Committee member in listen only mode
◼ Based on the feedback, each investor appeared to be sophisticated and well-informed about the Condor business (based on publicly
available information)
Summary take-aways from the two shareholder calls include:
1 Situation overview
9 |
| Overview of business plan
2
10 |
| PRELIMINARY DRAFT
Management Standalone Long-Range Plan
(“Standalone LRP”): review of plan development
Source: Standalone LRP, Condor Management
◼ In May 2023, Condor Management revisited its prior projections, and prepared the Standalone LRP based on its current view
of business conditions and outlook. The Standalone LRP reflects:
□ Recalibration of fiber build pace to manage around short-term liquidity constraints
□ Continued focus on long-term objective of 70% fiber coverage, achieved by 2029 vs. previous 2026 target
□ Renewed confidence on long-term fiber penetration target of 40% driven by new sales / marketing leadership and
go-to-market strategy
□ Input from recently appointed leadership on the timing and pace of recovery in the Commercial business
□ Up-to-date perspectives on fiber build costs and operating expense assumptions
◼ Newly determined short-term liquidity constraints:
□ Near-term liquidity impacted by inventory purchase commitments & current run-rates for success-based / maintenance
CapEx (~$30m) and build plan, including RDOF-related capital spend, (~$88m) in 2023 / 24. Based on leverage profile,
full revolver availability remains constrained over the next 24 months
□ Standalone LRP maximizes pace of build-out while operating at a minimum of ~$12m of liquidity in 2025, with revolver
capacity effectively fully consumed
◼ Potential risks and opportunities in the Standalone LRP:
□ Given limited liquidity, minor downside deviation to the Standalone LRP would result in the need for further slowing of the
fiber build out, a slowdown or cessation in pursuing new subscriber growth, or injection of outside capital
□ Conversely, acceleration of the Standalone LRP is limited by liquidity over the next 5 years without raising external capital
or outperformance on penetration / profitability in a challenging market environment
□ Preliminary perspectives on BEAD funding opportunities identified and considered by Condor Management to be reflected
in Standalone LRP; but extent of upside requires further detail on timing and access to location data to be fully quantified
2 Overview of business plan
11 |
| PRELIMINARY DRAFT
201
75
45
60
125
173
206
2023E 2024E 2025E 2026E 2027E 2028E 2029E
◼ Build plan balances maximization of fiber deployment while managing liquidity / maintaining covenant compliance
□ By 2027, business generates sufficient free cash flow to re-accelerate fiber build, reaching 71%1
fiber coverage by 2029E
□ CapEx cost per fiber passing ramps as RDOF market obligations are met in next few years
◼ Terminal residential fiber cohort penetration rates (40%) combined with higher ARPUs vs. legacy copper network results in material residential sales
growth throughout the period
◼ Enterprise revenues grow at a CAGR of ~3.2% from 2024 – 2031E, leading to an overall recovery of Commercial & Carrier revenue to 2019 levels
after multiple years of negative growth
◼ Operationally, COGS efficiency measures and improved operating leverage as fiber penetration ramps throughout the period lead to meaningful
Adj. EBITDA margin expansion (~50% by 2031E)
Standalone LRP: review of key plan assumptions
Source: Standalone LRP
Notes:
1. Includes residential and SMB
2. Reflects total copper + fiber passings; copper + fiber passings remain constant across forecast period at 2.5m passings
Key assumptions
Selected fiber build KPIs
Fiber passings built (000s) % fiberized of ~2.5m2 Cost per passing ($ actual) total passings
$474
$849 $925
$1,190
$1,460
$850 $850
2023E 2024E 2025E 2026E 2027E 2028E 2029E
45%
48% 50% 52%
57%
63%
71%
2023E 2024E 2025E 2026E 2027E 2028E 2029E
2 Overview of business plan
12 |
| PRELIMINARY DRAFT
Standalone LRP vs. consensus estimates1
In $ millions
Sources: Standalone LRP, FactSet (as of June 16, 2023)
Notes:
1. Median of broker estimates
2. Number of estimates denoted as number of EBITDA estimates / number of CapEx estimates
Revenue Adj. EBITDA
CapEx Adj. EBITDA less CapEx2
1,119
1,145
1,209
1,284
1,333
1,117 1,126
1,162
1,205
1,276
2023E 2024E 2025E 2026E 2027E
Chart Title
321 362
434
527
599
318 336 367
439
551
2023E 2024E 2025E 2026E 2027E
Chart Title 460
356
284 274
439 319
441 459
392
225
2023E 2024E 2025E 2026E 2027E (139)
6
150
252
280
(121)
(105) (92)
48
326
2023E 2024E 2025E 2026E 2027E
Chart Title
Standalone LRP
Consensus estimate
Number of estimates
3 3 2 1
1 1 1 1 1
3 3 3 2 1
3 / 1 3 / 1 3 / 1 2 / 1 1
2 Overview of business plan
13
Memo: number of Adj. EBITDA estimates / number of CapEx estimates |
| PRELIMINARY DRAFT
CAGR
$m, unless noted 2020PF 2021PF 2022PF 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E (23-27) (27-31)
Residential fiber $126 $198 $288 $377 $440 $510 $577 $645 $692 37% 12%
Resi copper, video, voice 328 301 278 257 231 213 195 178 163 (8%) (8%)
SMB 9 1 8 7 8 5 8 6 8 9 9 1 9 4 9 6 9 8 (0%) 2 %
Enterprise1 295 295 300 309 322 335 347 357 367 2 % 3 %
Carrier2
144 136 139 141 143 144 146 147 149 (0%) 1 %
Other3 135 127 120 114 108 102 9 7 9 3 8 8 (6%) (5%)
Revenue $1,238 $1,222 $1,145 $1,119 $1,145 $1,209 $1,284 $1,333 $1,396 $1,456 $1,517 $1,557 4 % 4 %
% growth n.a. (1%) (6%) (2%) 2 % 6 % 6 % 4 % 5 % 4 % 4 % 3 %
Gross profit $1,090 $1,066 $997 $881 $926 $996 $1,074 $1,133 $1,190 $1,242 $1,296 $1,331 7 % 4 %
% margin 88% 87% 87% 79% 81% 82% 84% 85% 85% 85% 85% 85%
Adj. EBITDA4 $462 $442 $369 $321 $362 $434 $527 $599 $652 $694 $746 $772 17% 7 %
% margin 37% 36% 32% 29% 32% 36% 41% 45% 47% 48% 49% 50%
Unlevered free cash flow5
($25) $97 $124 $150 $214 $221 $363 $399 n.a. 28%
% margin (2%) 8% 10% 11% 15% 15% 24% 26%
Memo:
CapEx ($460) ($356) ($284) ($274) ($319) ($318) ($336) ($231) ($221) (9%) (9%)
CapEx / Revenue % 41% 31% 23% 21% 24% 23% 23% 15% 14%
Change in working capital (20) 1 1 7 (23) (1) 1 2 (5) (10) (2) (55%) 30%
EBITDA - CapEx ($139) $6 $150 $252 $280 $334 $358 $515 $552 n.a. 19%
% conversion (43%) 2% 35% 48% 47% 51% 52% 69% 71%
Cost / Passing $474 $849 $925 $1,190 $1,460 $850 $850 n.a. n.a. 32% n.a.
Notes:
1. Enterprise revenue includes other commercial revenue (non-recurring and other services including
business systems, joint pole & special projects, commercial video services and other services)
2. Carrier revenue includes other carrier revenue (non-recurring and other services including business
systems, joint pole & special projects, commercial video services and other services)
3. Other revenue includes other subsidy revenue (excluding CAF), CAF / RDOF subsidy revenue, special
access revenue, network / switched access revenue, USF revenue and other products / services rev.
Source: Standalone LRP, pro forma historical periods (2020-2022) provided by Condor Management (normalized to exclude divestures of Ohio and Kansas City operations and wireless partnerships)
Summary of Standalone LRP
4. Adj. EBITDA does not account for burden of SBC
5. Unlevered free cash flow per Standalone LRP; calculated as EBIT – taxes + tax depreciation
– CapEx + / - change in NWC; does not consider generated nor utilized NOLs; negative EBIT
results in $0 tax paid; contemplating L3Q 2023 unlevered free cash flow for purposes
of valuation
2 Overview of business plan
14 |
| PRELIMINARY DRAFT
Summary of Standalone LRP (cont’d)
Source: Standalone LRP
Notes:
1. Adj. EBITDA does not account for burden of SBC
2. Defined as respective metric ÷ Adj. EBITDA
3. Levered free cash flow per Standalone LRP; calculated as EBITDA – taxes – CapEx + / - change in NWC – cash interest – finance lease payments – pension / OPEB contributions – one-time items; does not
contemplate impact of NOL generation / utilization
4. Net debt excludes deferred debt issuance costs
5. Total liquidity based on cash on hand and revolver availability
2 Overview of business plan
15
Select cash flow and leverage metrics
CAGR
$ m 2023E 2024E 2025E 2026E 2027E (23-27)
Adj. EBITDA1 $321 $362 $434 $527 $599 17%
% margin 29% 32% 36% 41% 45%
Build (168) (92) (38) (55) (116) (9%)
Success-based (175) (163) (166) (146) (134) (6%)
Maintenance capex (117) (101) (79) (73) (69) (12%)
CapEx ($460) ($356) ($284) ($274) ($319) (9%)
% sales 41% 31% 23% 21% 24%
Adj. EBITDA1
- CapEx ($139) $ 6 $150 $252 $280 n.a.
% conversion 2
(43%) 2 % 35% 48% 47%
Levered free cash flow3
($376) ($201) ($48) $11 $68 n.a.
% conversion 2
(117%) (56%) (11%) 2 % 11%
Leverage3
6.7x 6.5x 5.5x 4.5x 3.8x n.a.
Memo: Net debt3,4 2,158 2,347 2,370 2,347 2,275 n.a.
Liquidity5 $261 $60 $12 $24 $76 n.a. |
| Preliminary valuation perspectives
3
16 |
| PRELIMINARY DRAFT
Selected public
company analysis
◼ Selected publicly-traded companies in the U.S. broadband sector
◼ Analysis based on implied enterprise value multiples of CY 2024 revenue and CY 2024 Adj. EBITDA
◼ Selected revenue and Adj. EBITDA multiples applied to Condor 2024 revenue and Adj. EBITDA, respectively, based
on Standalone LRP
◼ Selected precedent acquisition transactions in the U.S. broadband sector
◼ Analysis based on implied transaction enterprise value multiples of last twelve months (LTM) Adj. EBITDA
◼ Selected multiples applied to Condor’s LTM (March 2023) Adj. EBITDA as per Standalone LRP1
Selected
precedent
transactions
analysis
Overview of preliminary valuation methodologies and
other references
◼ Analysis of Standalone LRP as provided on June 19, 2023
□ Valuation date as of March 31, 2023
□ Perpetuity growth rates of 1.5 – 2.5%
□ Weighted average cost of capital (WACC) of 9.5 – 10.5%
□ Valuation range includes present value of Condor net operating losses which have been valued separately
Illustrative
discounted
cash flow
analysis
Other references
Other
metrics
Premia paid
analysis
◼ Analysis of observed premia to unaffected stock price in all-cash going private transactions and acquisitions
□ Going-private transactions include U.S. targets with transaction enterprise values above $250m since 2013 with pre-transaction acquiror ownership greater than 15%
□ Acquisition transactions include U.S. targets with transaction enterprise values between $1.0 – 5.0bn since 2013
◼ Implied premia applied to Condor’s unaffected stock price of $2.76 on April 12, 2023
◼ Condor 52-week stock trading range
◼ Equity research analysts stock price targets (both unaffected and following public announcement of Seagull’s
going private proposal)
Source: Standalone LRP
Note:
1. LTM on like-for-like basis to go-forward business per Condor Management pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
3 Preliminary valuation perspectives
17 |
| PRELIMINARY DRAFT
3. NOL schedule based on Standalone LRP
4. Selection excludes SADIF Investment Analytics, which has not updated
its target price since January 2023
Preliminary assessment of valuation methodologies
Sources: Standalone LRP, company filings, FactSet (as of June 16, 2023), Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Rounded to neared $0.25 except for 52-week high / low
2. Per Condor Management, assumes 118.7m fully diluted shares outstanding, net debt of $1.86bn, net, tax-effected PBO and
OPEB of $94.5m, NCI of $7.8m, Investments of $9.1m and preferred equity valued at liquidation preference of $487.6m
April 12 Seagull proposal: $4.00 th closing price: $2.76
Methodology Per-share value ($ actual)1,2 Implied EV ($bn)2 Assumptions
Core methodologies
Selected
public company
analysis
EV / 2024E
Revenue $2.6 – 3.2 ◼ EV / 2024E Revenue: 2.25x – 2.75x
EV / 2024E
Adj. EBITDA $2.0 – 2.5 ◼ EV / 2024E Adj. EBITDA multiple: 5.5x – 7.0x
Selected
precedent
transactions
EV / LTM
Q1’23 Adj.
EBITDA
$2.1 – 3.3 ◼ EV / LTM Adj. EBITDA: 6.0x – 9.4x
Illustrative discounted
cash flow analysis $2.7 – 3.5
◼ PGR: 1.5 – 2.5%
◼ WACC: 9.5 – 10.5%
◼ Valuation date as of 3/31/2023
Other references
Premia paid
analysis
All-cash
going private
transactions
$2.9 – 3.0
◼ 27 – 64% (25th and 75th percentile,
respectively) premia to April 12, 2023
closing price of $2.76
All-cash
acquisitions $2.8 – 2.9
◼ 21 – 53% (25th and 75th percentile,
respectively) premia to April 12, 2023
closing price of $2.76
Other
metrics
52-week
high / low $2.7 – 3.3 ◼ 52-week trading high and low closing prices
as of June 16, 2023
Analyst
target prices
Unaffected
$2.7 – 3.0 ◼ Represents low and high of analyst target
prices as of April 12, 20234
Analyst
target prices
Current
$2.9 – 2.9 ◼ Represents low and high of analyst target
prices as of June 16, 20234
3 Preliminary valuation perspectives
18
1.25
n.m.
n.m.
2.00
3.50
3.25
2.15
2.50
3.50
9.00
6.00
0.75
7.00
9.75
4.50
4.25
7.50
4.50
4.00
2.75
Incl. NOL value3 |
| PRELIMINARY DRAFT
Enterprise value ($m) Implied terminal multiple
at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $3,136 $3,219 $3,308 $3,402 $3,504 6.5x 6.8x 7.0x 7.3x 7.6x
9.75% 3,008 3,085 3,167 3,254 3,347 6.3x 6.6x 6.8x 7.0x 7.3x
10.00% 2,889 2,960 3,035 3,116 3,202 6.2x 6.4x 6.6x 6.8x 7.0x
10.25% 2,776 2,842 2,912 2,987 3,066 6.0x 6.2x 6.4x 6.6x 6.8x
10.50% 2,670 2,732 2,797 2,865 2,939 5.8x 6.0x 6.2x 6.4x 6.6x
Implied share price Implied share price (incl. NOLs)
at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $5.86 $6.57 $7.31 $8.11 $8.97 $6.62 $7.32 $8.07 $8.87 $9.73
9.75% 4.79 5.44 6.13 6.86 7.65 5.54 6.19 6.88 7.62 8.40
10.00% 3.78 4.38 5.02 5.70 6.42 4.53 5.13 5.77 6.44 7.17
10.25% 2.84 3.39 3.98 4.61 5.28 3.58 4.13 4.72 5.35 6.02
10.50% 1.94 2.46 3.01 3.59 4.20 2.68 3.20 3.74 4.32 4.94
Illustrative discounted cash flow analysis
3,4
2. STANDALONE LRP
Sensitized valuation range1,2
4 4,5
Sources: Standalone LRP, company filings, Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Projected unlevered cash flows as per Standalone LRP; reviewed and approved for Rothschild & Co’s use by
Condor Management
2. Terminal period assumptions per Condor Management; D&A assumed equal to CapEx per Condor Management
3. Valuation date as of March 31, 2023
4. Balance sheet as of March 31, 2023 as per Condor Management; Condor Management-provided FDSO of 118.7m as of May 31, 2023
5. Reference NOL valuation on Page 50
3 Preliminary valuation perspectives
19
Terminal value accounts for approximately
74 – 79% of DCF enterprise value |
| PRELIMINARY DRAFT
DCF sensitivity to varying operating assumptions
Does not contemplate illustrative impacts to liquidity and NOL usage
Implied per-share DCF midpoint range Base assumption 1,2,3 Item Sensitivity range
Sources: Standalone LRP, company filings, FactSet (as of June 16, 2023), Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Balance sheet as of March 31, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of May 31, 2023
2. Valuation date as of March 31, 2023
3. Assumes WACC of 10.0% and PGR of 2.0%
~3.2%
Enterprise sales
growth
◼ Enterprise sales decline ~1% in
2023E and grow at a CAGR of
~3.2% from 2024 – 2031E
0% 5%
~49.6%
◼ Adj. EBITDA margin reaches ~49.6%
by 2031E 45% 50%
Terminal
Adj. EBITDA
margin
Residential fiber
terminal
penetration
◼ Residential fiber cohorts reach 40%
penetration by year 6 35% 45%
Cost per home
passed
◼ Blended cost per home passed
increases from ~$850 in 2024 to
~$1,500 by 2027, dropping to $850
thereafter (pre-CWIP / Inventory)
40%
-$200
vs. base
+$200
vs. base
~$850 – ~1,500; $850
~15.0 – 12.0% Non-video
COGS %
of sales
◼ COGS % of sales decline from
~15.0% in 2023E and stepped down
to 12.0% by 2027E;
held at 12.0% through 2031E
-100 bps
vs. base
+100 bps
vs. base
13%
Terminal CapEx
% of sales
◼ “Steady-state” CapEx estimated at
13% of sales in terminal period 10% 15%
3 Preliminary valuation perspectives
20
2.99
4.41
2.31
4.07
1.12
3.89
6.75
5.40
6.67
5.97
5.37
6.71
Base DCF
midpoint: $5.02 |
| PRELIMINARY DRAFT
$2.76
$3.68
$5.87
$9.52
$11.47
$12.24
$0.95
$2.93
$6.26
$8.13
$8.99
n.m.
$0.21
$3.48
$5.40
$6.40
–
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Unaffected Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E
9.0x 8.0x 7.0x
2025E
Implied PV of '25E share price at illustrative trading multiple of
6.0x 7.0x 8.0x 9.0x 10.0x
12.5% $0.63 $3.57 $6.42 $9.75 $13.01
13.0% 0.62 3.53 6.34 9.64 12.85
13.5% 0.62 3.48 6.26 9.52 12.69
14.0% 0.61 3.44 6.19 9.41 12.54
14.5% 0.60 3.40 6.11 9.29 12.39
2026E
Implied PV of '26E share price at illustrative trading multiple of
6.0x 7.0x 8.0x 9.0x 10.0x
12.5% $3.02 $5.58 $8.40 $11.85 $15.17
13.0% 2.97 5.49 8.26 11.66 14.92
13.5% 2.92 5.40 8.13 11.47 14.67
14.0% 2.87 5.31 8.00 11.28 14.43
14.5% 2.82 5.23 7.87 11.10 14.20
2027E
Implied PV of '27E share price at illustrative trading multiple of
6.0x 7.0x 8.0x 9.0x 10.0x
12.5% $4.43 $6.68 $9.37 $12.77 $15.99
13.0% 4.33 6.54 9.18 12.50 15.66
13.5% 4.24 6.40 8.99 12.24 15.33
14.0% 4.16 6.27 8.80 11.99 15.02
14.5% 4.07 6.14 8.62 11.74 14.71
Ke
Ke
Ke
Sources: Standalone LRP, company filings, FactSet (as of June 16, 2023), Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Illustrative share prices based on fully diluted shares outstanding that includes illustrative shares issued from stock-based compensation at average illustrative future share price
2. 2025E – 2027E enterprise value to equity value bridge per Standalone LRP
Illustrative PV of future share value
13.5% cost of equity
PV of Future Share Value1,2
NTM EV / Adj. EBITDA:
Observed public
company multiples Illustrative multiple re-rating
3 Preliminary valuation perspectives
21
Cost of
equity
Cost of
equity
Cost of
equity |
| PRELIMINARY DRAFT
Sources and uses $ m % of total Sources and uses $ m % of total
New debt $1,630 46% Rollover of debt $2,309 67%
Cash on balance sheet 1 0 0 % Cash on balance sheet 1 0 0 %
New equity 1,877 53% New equity 1,139 33%
Total sources $3,517 100% Total sources $3,459 100%
Memo: Incremental equity funding during ownership – Memo: Incremental equity funding during ownership $225
Equity purchase price ($4.00 / share) $475 13% Equity purchase price ($4.00 / share) $475 14%
Refi existing gross debt 2,309 66% Rollover of debt 2,309 67%
Redemption of preferred 583 17% Redemption of preferred 583 17%
Transaction & financing fees 8 8 2 % Transaction & financing fees 4 1 1 %
Call premium on Sr. Notes 1 2 0 %
Cash to balance sheet 5 0 1 % Cash to balance sheet 5 0 1 %
Total uses $3,517 100% Total uses $3,459 100%
Acquisition by new financial buyer with refinancing of existing capital
structure and take-out of preferred equity
Acquisition by new financial buyer with portable capital structure through
solicitation of a change of control waiver
Illustrative financial buyer perspective assessment1
New buyer: illustrative new capital structure New buyer: capital structure rollover
Sources: Illustrative Buyer Plan (No Pre-Closing Capital), R&Co financing extrapolations
Notes:
1. Based on Illustrative Buyer Plan (No Pre-Closing Capital)
2. Assumes term loan B (4.5x leverage; 98.0 OID; 2.25% underwriter fee; priced at S+500)
3. Assumes preferred equity redeemed at applicable premium
4. Transaction fees include M&A fees, commitment fee on revolver, financing fees on term loan B and
OID fees on term loan B
5. Represents call premium at 101 on 6.50% and 5.00% Senior Notes
6. Transaction fees include M&A fees, commitment fee on revolver and illustrative consent
solicitation fee
2
3
5
4
3
6
Illustrative transaction close date of 12/31/2024; exit at 12/31/31
Ability to pay
Target Share price at LTM exit multiple of Target Share price at LTM exit multiple of
IRR 7.0x 8.0x 9.0x 10.0x IRR 7.0x 8.0x 9.0x 10.0x
14.0% $4.48 $7.05 $9.63 $12.21 14.0% $7.29 $9.86 $12.44 $15.02
15.5% 3.06 5.41 7.76 10.11 15.5% 6.05 8.40 10.76 13.11
17.0% 1.78 3.93 6.08 8.23 17.0% 4.94 7.09 9.24 11.39
18.5% 0.63 2.59 4.56 6.52 18.5% 3.94 5.91 7.87 9.84
20.0% -- 1.39 3.19 4.99 20.0% 3.04 4.84 6.64 8.44
EBITDA trajectory allows for additional leverage
capacity in period and thus no further equity
Existing capital structure prevents further debt financing; additional Sponsor equity is
required during the projection period to fund fiber build
3 Preliminary valuation perspectives
22 |
| PRELIMINARY DRAFT
Sources and uses $m % of total
Rollover of debt $2,309 68%
Cash on balance sheet 10 0%
Rollover of preferred 569 17%
Rollover of equity 157 5%
New equity 375 11%
Total sources $3,421 100%
Memo: Incremental equity funding during ownership $225
Equity purchase price ($4.00 / share) $475 14%
Rollover of debt 2,309 68%
Rollover of preferred 569 17%
Transaction & financing fees 18 1%
Cash to balance sheet 50 1%
Total uses $3,421 100%
Illustrative Seagull perspective assessment1
Sources: Illustrative Buyer Plan (No Pre-Closing Capital), R&Co financing extrapolations
Notes:
1. Based on Illustrative Buyer Plan (No Pre-Closing Capital)
2. Based on liquidation preference of preferred as of 12/31/2024E
3. Transaction fees include M&A fees and commitment fee on revolver
4. Illustratively assumes preferred equity remains in place during investment period with a 9% semi-annual PIK coupon; Illustrative proceeds allocable to initial investment calculated as implied accreted
liquidation value of preferred equity at exit plus implied proceeds to existing Seagull common equity
stake; illustrative proceeds allocable to new Seagull & Blue Jay equity deployed calculated as implied
total exit proceeds less proceeds allocated to initial investment
Acquisition by Seagull with portable capital structure and no change of control
given existing equity stake in business
Overview Seagull ability to pay4
Target Share price at LTM exit multiple of
IRR 7.0x 8.0x 9.0x 10.0x
14.0% $7.79 $10.36 $12.93 $15.50
15.5% 6.89 9.23 11.58 13.92
17.0% 6.07 8.21 10.36 12.50
18.5% 5.34 7.30 9.26 11.22
20.0% 4.68 6.47 8.27 10.06
Illustrative IRR on Seagull investments4
Represents implied IRR on Seagull’s initial common and preferred equity
investments of $350m and $75m in 2020 and 2021, respectively
3
2
2
Illustrative close date of 12/31/2024; exit at 12/31/31
Represents return on new Seagull
& Blue Jay equity deployed only
Implied IRR at entry share price of
$4.00 $5.00 $6.00 $7.00 $8.00 $9.00
7.0x 15.7% 22% 19% 17% 15% 14% 12%
8.0x 16.9% 26% 23% 21% 19% 17% 16%
9.0x 17.9% 29% 26% 24% 22% 20% 19%
10.0x 18.9% 32% 29% 27% 25% 23% 22%
Exit
multiple
IRR on
initial inv.
3 Preliminary valuation perspectives
23 |
| PRELIMINARY DRAFT
Illustrative share price $2.76 $3.70 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00
Implied premia to:
Unaffected (April 12, 2023) $2.76 – 34.1% 44.9% 63.0% 81.2% 99.3% 117.4% 135.5% 153.6% 171.7% 189.9%
Current (June 16, 2023) $3.70 (25.4%) – 8.1% 21.6% 35.1% 48.6% 62.2% 75.7% 89.2% 102.7% 116.2%
1-month VWAP $2.49 10.9% 48.6% 60.7% 80.8% 100.8% 120.9% 141.0% 161.1% 181.2% 201.3% 221.3%
2-month VWAP $2.86 (3.5%) 29.3% 39.8% 57.3% 74.8% 92.3% 109.7% 127.2% 144.7% 162.2% 179.7%
3-month VWAP $3.07 (10.1%) 20.5% 30.3% 46.6% 62.8% 79.1% 95.4% 111.7% 128.0% 144.3% 160.5%
6-month VWAP $3.54 (22.1%) 4.4% 12.9% 27.0% 41.1% 55.2% 69.3% 83.4% 97.5% 111.6% 125.7%
52-week high (June 24, 2022) $7.50 (63.2%) (50.7%) (46.7%) (40.0%) (33.3%) (26.7%) (20.0%) (13.3%) (6.7%) – 6.7%
52-week low (March 24, 2023) $2.15 28.4% 72.1% 86.0% 109.3% 132.6% 155.8% 179.1% 202.3% 225.6% 248.8% 272.1%
(×) Fully diluted shares outstanding 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7
Implied equity value $328 $439 $475 $534 $593 $653 $712 $771 $831 $890 $949
(+) Net debt 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859 1,859
(+) Preferred stock (at liquidation pref.) 488 488 488 488 488 488 488 488 488 488 488
(+) Other adjustments 93 93 93 93 93 93 93 93 93 93 93
Implied enterprise value $2,767 $2,879 $2,914 $2,974 $3,033 $3,092 $3,152 $3,211 $3,270 $3,330 $3,389
Memo: implied EV premium – 4.0% 5.3% 7.5% 9.6% 11.8% 13.9% 16.0% 18.2% 20.3% 22.5%
Implied multiples
EV / Revenue
2022PF $1,145 2.42x 2.51x 2.54x 2.60x 2.65x 2.70x 2.75x 2.80x 2.86x 2.91x 2.96x
LTM Mar-23PF 1,133 2.44 2.54 2.57 2.62 2.68 2.73 2.78 2.83 2.89 2.94 2.99
2023E 1,119 2.47 2.57 2.60 2.66 2.71 2.76 2.82 2.87 2.92 2.97 3.03
2024E 1,145 2.42 2.51 2.55 2.60 2.65 2.70 2.75 2.80 2.86 2.91 2.96
EV / Adj. EBITDA
2022PF $369 7.5x 7.8x 7.9x 8.1x 8.2x 8.4x 8.5x 8.7x 8.9x 9.0x 9.2x
LTM Mar-23PF 349 7.9 8.2 8.3 8.5 8.7 8.9 9.0 9.2 9.4 9.5 9.7
2023E 321 8.6 9.0 9.1 9.3 9.5 9.6 9.8 10.0 10.2 10.4 10.6
2024E 362 7.6 8.0 8.1 8.2 8.4 8.5 8.7 8.9 9.0 9.2 9.4
Analysis at various prices
Seagull proposal implies 9.1x 2023E Adj. EBITDA and 8.1x 2024E Adj. EBITDA
Unaffected
Seagull
Current proposal
Sources: Company filings, FactSet (as of June 16, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Calendar day VWAPs; as of April 12, 2023
2. Balance sheet as of March 31, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of May 31, 2023
3. Other adjustments include net, tax-effected PBO and OPEB, NCI and Investments (net tax-effected PBO and OPEB provided per Condor Management, NCI and Investments sourced from Company filings)
4. Projected metrics per Standalone LRP; historical metrics per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
2
3
4
2
1
1
1
1
3 Preliminary valuation perspectives
24 |
| Valuation detail
4
25 |
| PRELIMINARY DRAFT
Sources: Standalone LRP, company filings, FactSet (as of June 16, 2023 and April 12, 2023)
Notes:
1. Peers based on consensus estimates
2. Including / excluding Condor preferred equity (at liquidation preference of $487.6m as per Q1 2023 Form 10-Q)
3. LTM metric per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
3.8x
3.2x
4.0x
0.7x
6.7x
4.5x
2.8x
2.7x
5.3x 6.7x
2%
(2%)
1%
11%
(1%)
2%
2%
3%
4%
6%
(1%)
2%
30%
1%
3%
8%
8%
16%
Condor
(Standalone LRP)
Revenue CAGR Adj. EBITDA CAGR Adj. EBITDA margin CapEx % of sales Net leverage
2023E – 2025E 2023E – 2025E 2023E 2023E – 2025E avg. LTM Mar-23A
ILEC Rural cable Cable BB
2,3
Selected public company analysis: operational benchmarking
36%
32%
55%
29%
39%
40%
41%
24%
29%
51%
21%
23%
77%
18%
20%
34%
18%
32%
Peer median1 2% 5% 37% 22% 3.5x
4 Valuation detail
26 |
| PRELIMINARY DRAFT
Rural cable
ILEC
Sources: Standalone LRP, company filings, FactSet (as of June 16, 2023 and April 12, 2023)
Notes:
1. Peers based on consensus estimates
2. Metrics based on Standalone LRP; Balance sheet as of March 31, 2023 and outstanding stock and stock equivalents as of May 31, 2023 per Condor Management
Selected public company analysis: valuation benchmarking
1
Condor
1
(Unaffected)
Cable
Broadband
Consensus
Standalone
LRP
2.25x
1.66x
3.83x
3.37x
2.90x
2.73x
2.04x
1.47x
2.46x
2.42x
Median: 1.96x
Median: 3.60x
Median: 2.73x
2.26x
1.60x
3.81x
3.80x
2.85x
2.80x
2.07x
1.50x
2.48x
2.47x
Median: 1.93x
Median: 3.80x
Median: 2.80x
EV / 2023E Revenue EV / 2024E Revenue
4 Valuation detail
27
6.3x
5.0x
6.9x
13.3x
7.4x
7.0x
5.1x
6.2x
8.7x
8.6x
Median: 5.6x
Median: 10.1x
Median: 7.0x
6.0x
5.2x
6.8x
11.5x
7.3x
6.7x
4.8x
5.6x
8.2x
7.6x
Median: 5.6x
Median: 9.2x
Median: 6.7x
Overall median
2.53x 2.49x 6.6x
1 6.4x
EV / 2023E Adj. EBITDA EV / 2024E Adj. EBITDA |
| PRELIMINARY DRAFT
8.8x
5.5x
6.3x
5.9x
9.4x
0.0x
4.0x
8.0x
12.0x
16.0x
20.0x
24.0x Average EV / NTM since (x)
10yr 5yr 4yr 3yr 2yr 1yr
Condor 6.9x 6.4x 6.4x 6.7x 7.4x 8.2x
ILEC
Frontier 6.5x 6.5x 6.5x 6.5x 6.5x 6.4x
Lumen 5.9x 5.6x 5.4x 5.4x 5.3x 5.1x
Average 6.0x 5.8x 5.8x 5.8x 5.9x 5.8x
Rural cable
Cable One NM 13.3x 13.7x 12.9x 10.8x 8.0x
Shentel NM NM NM NM NM 12.5x
Average NM 13.6x 14.1x 13.5x 11.7x 10.2x
Cable
Altice 8.6x 8.5x 8.4x 8.2x 7.7x 7.2x
Charter 9.3x 9.3x 9.4x 9.1x 8.3x 7.1x
WOW! 7.0x 6.9x 6.9x 7.1x 7.1x 6.2x
Average 8.6x 8.2x 8.2x 8.1x 7.7x 6.8x
Broadband
ATN International 6.7x 7.6x 7.1x 6.8x 6.6x 6.5x
Overall average 8.2x 8.7x 8.7x 8.5x 8.1x 7.4x
Average ex. Shentel 8.1x 8.5x 8.4x 8.1x 7.5x 6.6x
Selected public companies: valuation over time
EV / NTM EBITDA (L10Y)1
Sources: FactSet (as of June 16, 2023), company filings
Note:
1. Includes Shentel beginning July 1, 2021, the closing date of the sale of its wireless assets and operations to T-Mobile
4 Valuation detail
28 |
| PRELIMINARY DRAFT
Target
Acquiror
EV ($bn) $0.3 $1.6 $0.9 $0.7 $0.2 $3.1 $0.3 $2.0 $10.5 $1.4 $7.5
Date Jun-14 Dec-16 Feb-17 Jul-17 Dec-19 Mar-20 Jan-21 Dec-13 Jan-14 May-19 Aug-21
7.3x
6.0x
9.4x
6.1x 6.4x
7.6x
5.0x 4.8x
6.7x
5.0x
5.5x
Sources: company filings, press releases
Notes:
1. Acquisition of wireline operations in Connecticut; 2014 PF Day 1 EBITDA from company investor
presentation issued 12/17/13
2. Sale of wireline operations in California, Texas and Florida based on total consideration and segment
EBITDA from investor presentation 2/5/15 and 8-K 6/2/15 respectively
3. Sale of operations and associated assets in Washington, Oregon, Idaho and Montana
4. Sale of ILEC business including consumer, SMB, wholesale and mostly copper-served enterprise
customers and assets in 20 states; multiple as-disclosed by Lumen based on 2020E EBITDA
Selected precedent transactions
(CA, TX, FL
assets)2
(CT assets)1
Select U.S. broadband sector public transactions since 2013
(WA, OR, ID,
MT assets)3
(ILEC assets)4
4
Full company acquisition Corporate carve-outs
Mean: 5.5x
Median: 5.2x
Mean: 6.8x
Median: 6.4x
4 Valuation detail
29 |
| PRELIMINARY DRAFT
21%
32%
45%
53%
25th percentile Median Mean 75th percentile
Premiums paid analysis
Sources: company filings, Refinitiv, FactSet (as of June 16, 2023)
Notes:
1. Includes U.S. going private transactions led by shareholders with ownership of 15% or greater since 2013
2. Includes acquisitions of U.S. companies by third parties with enterprise values of $1.0 – 5.0bn since 2013
Going private transactions1 Public acquisition transactions2
Implied Condor share price based on $2.76 unaffected price:
$3.34 $3.64 $4.00 $4.22 27%
45%
52%
64%
25th percentile Median Mean 75th percentile
Implied Condor share price based on $2.76 unaffected price:
$3.51 $3.99 $4.19 $4.52
4 Valuation detail
30 |
| Alternative considerations
5
31 |
| PRELIMINARY DRAFT
Strategic alternatives for Special Committee's consideration
Benefits Considerations
Continue as standalone company
Execute on Management
Standalone Long-Range Plan
◼ Potential to realize future valuation uplift from fiber conversion
◼ Preserve capital / re-accelerate build when financing markets
improve / EBITDA accelerates
◼ Build cadence materially below prior plan / public guidance
◼ Market has given Condor minimum credit for execution
◼ Liquidity risk if Condor underperforms
Raise capital (if available) and
execute on more aggressive build
plan
◼ Allows Condor to continue prior build cadence (i.e., execute
“2026 70% Build Plan”1)
◼ Would require ~$450m - 500m of new capital by 2026
◼ New equity would be at a material discount / highly dilutive to current
shareholders
◼ May require shareholder / regulatory approval
Explore sale of select state /
regional operations
◼ Provides additional capital without diluting shareholders
◼ Allows Management to focus resources on smaller footprint
◼ Can exit lower-value states of less strategic interest
◼ Valuation may be dilutive to current multiple / negatively impact liquidity
◼ Timing of capital availability (9 - 18 months to close transaction
depending on separability)
◼ Smaller states provide limited proceeds unlikely to impact business
trajectory
Seagull transaction alternatives
Negotiate transaction with Seagull /
Blue Jay
◼ All-cash proposal at a premium
◼ Actionable path today with portable capital structure
◼ Limited diligence requirements given familiarity with business
and Management
◼ Shareholders forego potential upside from fiber deployment
Offer Seagull opportunity to
acquire > 51% through tender offer
◼ Path to majority control of Condor for Seagull
◼ Provides some optionality for other shareholders to continue or
exit investment
◼ Unclear what control premium would be available
◼ Unclear what exit opportunities would exist in the future
◼ Does not address near-term funding need
◼ Seagull may not have an interest
Offer Seagull the opportunity to
provide additional capital ◼ Option for Seagull to put in similar preferred security
◼ Expensive capital that dilutes equity long-term
◼ Likely to provide de facto / actual control to Seagull without a
control premium
◼ No liquidity for current shareholders
Third-party transaction alternatives
Sell to financial buyer
◼ With existing capital structure
◼ With new capital structure
◼ Possible another financial buyer is willing to pay more
than Seagull
◼ Debt refinancing at lower leverage / higher cost than
current capital structure
◼ Would likely require change of control waiver to facilitate a
competitive process
◼ May be difficult to get debt financing commitment for 12-18
months between sign and close
Sell to / merge with strategic buyer
◼ With existing capital structure
◼ With new capital structure
◼ Synergy value partially shared with Condor shareholders
◼ Can use equity consideration to bridge valuation gap
◼ Shareholders provided upside option on equity
◼ Most strategics undergoing similar fiber deployment strategies as Condor
with constrained balance sheets; limits ability to pay cash
1
2
3
5 Alternative considerations
32
a
a
b
c
b
a
b
c
Note:
1. “2026 70% Build Plan” is the same as the Illustrative Buyer Plan (Including Pre-Closing Capital) |
| PRELIMINARY DRAFT
Net leverage3
Considerations for raising capital to fund 2026 70%
Build Plan
◼ 2026 70% Build Plan has ~$475m total shortfall in capital by 2026
◼ Current revolver covenants limit ability to use leverage capacity to fund
shortfall
□ Model projects revolver fully drawn up to 35% springing covenant
level ($79m) by year-end 2023
□ Incurrence of debt above 35% revolver draw is subject to a 6.35x
leverage covenant1
□ Based on EBITDA / cash generation profile, additional leverage
capacity below 6.35x covenant level unavailable until 2026
◼ ~$475m of new capital would be needed to bridge to the point at
which additional revolver capacity is available to fund the remainder of
the ~$475m shortfall
◼ Seagull approval rights may limit flexibility to raise capital and require
careful consideration
Situation overview 2026 70% Build Plan liquidity and leverage overview3
Total liquidity
Net leverage3
Total liquidity
Ending revolver capacity New capital raise Ending cash balance 2
A
B
A
Pro forma3 B for illustrative capital raise at Dec-23E
Source: Illustrative Buyer Plan (including pre-closing capital)
Notes:
1. RCF features a springing maximum net first lien leverage ratio of 6.35x through June 30, 2025, stepping down to 5.85x thereafter. Covenant testing triggered when borrowings outstanding exceed 35.0%
2. Represents non-debt capital raise
3. Defined as debt (gross of issuance costs) including finance leases less cash on hand ÷ LTM EBITDA
336
28
(209)
(405) (467)
(183)
241
79
-- --
577 107 (209) (405) (467) (249)
4.9x 6.7x 6.9x 6.0x 4.8x 3.7x
Mar-23A Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E Chart Title
5 Alternative considerations
33
336
27
188
10 10
222
475
241
241
241
227 166
241
577 744 429 237 176 395
4.9x 5.2x 5.6x 4.9x 4.0x 3.0x
Mar-23A Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E Chart Title
1B |
| PRELIMINARY DRAFT
Pursue capital raise – potential sources of standalone
financing for Condor
Description Considerations Achievability
Dilutive impact to
common shares
Public offering of common stock
Common equity
offering
Marketed stock offer or private
placement (i.e., PIPE)
◼ Shareholder approval required if offering or PIPE
exceeds 19.9% of then-current shares outstanding
◼ Size of capital raise compared to current market
cap makes execution very difficult
□ Unaffected market cap of $328m
Low High
Rights offering
Offer existing shareholders
transferable rights to acquire
common stock, likely needs
backstop from Seagull
◼ Generally, no shareholder approval required
◼ Backstop likely to be required to achieve minimum
level of proceeds, would likely be very expensive
◼ Highly unique financing strategy in U.S. – few
rights offerings completed
◼ May be interpreted as sign of financial distress
◼ Potentially cede control to Seagull without a
control premium to extent Seagull participates in
excess of pro rata share
Low
None
(for those who
participate)
Other alternatives
Preferred stock
offering
Structured equity investment,
potentially convertible to
common stock – mid-teens
return target
Would be a private placement,
likely subject to shareholder
approval
◼ Ability for PIK accretion provides liquidity cushion
◼ Accretion can be highly dilutive to common stock if
material growth not achieved
◼ Seniority to existing preferred equity needs to be
negotiated
◼ Requires shareholder vote if conversion or voting
power exceeds 19.9%
◼ Potentially cede control to Seagull without a
control premium to extent Seagull participates in
excess of pro rata shares
Low / Medium Very high
Asset
securitization
Pooling of assets into a
leveraged bankruptcy-remote
SPV
◼ Increased total leverage at more favorable rates
◼ Ability to layer debts in different risk tranches
◼ Timely and complex to execute
◼ Increased management time spent on compliance
Medium
(more feasible as
footprint is overbuilt)
None
Access to capital is challenged by existing capital structure’s limited capacity for additional secured / unsecured debt,
as well as Seagull’s approval rights
1B
5 Alternative considerations
34 |
| PRELIMINARY DRAFT
$m 2023E 2024E 2025E 2026E 2027E
Seagull preferred (at liquidation preference) $521 $569 $621 $678 $741
Illustrative new preferred instrument (15% IRR) 475 546 628 722 831
Total preferred equity (pro forma) 996 1,115 1,249 1,401 1,572
(+) Net debt 1,672 1,980 2,154 2,211 1,979
Memo: xLTM EBITDA 5.2x 5.6x 4.9x 4.0x 3.0x
Net debt including preferred equity 2,668 3,095 3,404 3,612 3,550
Memo: xLTM EBITDA 8.3x 8.7x 7.7x 6.5x 5.3x
$m, except per share
Illustrative capital requirement $475
Undisturbed share price $2.76
Illustrative offering discount 20.0%
Implied offering price $2.30
Implied shares issued 206.5
% of current basic shares outstanding 177.0%
Considerations for raising capital to standalone funding
Source: Illustrative Buyer Plan (Including Pre-Closing Capital)
Note:
1. Defined as debt (gross of issuance costs)
including finance leases less cash
◼ Limited recent precedents in U.S. public markets
◼ Issued at meaningful discount to trading price
◼ Practical requirement to have Seagull’s participation in order to underwrite
◼ Highly bespoke instruments with range of potential structures / terms
◼ Likely needs to be structured as junior to Seagull preferred equity
◼ Based on capital structure, investors would likely target 10% - 25% total return
through a convertible preferred instrument
□ PIK interest (10 - 15%) for portion or all of instrument life
□ Conversion to common equity at a premium (10 - 20%) after specified period
□ Make-whole if called within certain period (~3 years)
□ Put rights for new investor (cash redemption or mandatory conversion)
□ Potential governance considerations
◼ Structuring may require management of change-of-control terms on current
debt (dependent on size of conversion)
Negotiated senior equity instrument
New capital:
illustrative options
Rights issue
Public market announcement of need for liquidity may result in negative
share price reaction, impacting the cost / terms of external capital
Illustration Illustration
1
5 Alternative considerations
35
1B |
| PRELIMINARY DRAFT
2027E
Implied PV of '27E share price at illustrative trading multiple of
6.0x 7.0x 8.0x 9.0x 10.0x
15.0% – $3.13 $6.45 $8.84 $12.42
17.5% – 2.63 5.94 8.33 11.92
20.0% – 2.07 5.39 7.78 11.38
22.5% – 1.46 4.79 7.19 10.80
25.0% – 0.88 4.13 6.56 10.16
PIK
rate
Standalone LRP
1A
Notes:
1. Illustrative share prices based on fully diluted shares outstanding that includes illustrative shares
issued from stock-based compensation at average illustrative future share price 2. 2027E enterprise value to equity value bridge per Standalone LRP
2027E
Implied PV of '27E share price at illustrative trading multiple of
6.0x 7.0x 8.0x 9.0x 10.0x
12.5% $4.43 $6.68 $9.37 $12.77 $15.99
13.0% 4.33 6.54 9.18 12.50 15.66
13.5% 4.24 6.40 8.99 12.24 15.33
14.0% 4.16 6.27 8.80 11.99 15.02
14.5% 4.07 6.14 8.62 11.74 14.71
Ke
Commentary
Standalone LRP vs. capital raise – potential value
impact to Condor shareholders
Sources: Standalone LRP, Illustrative Buyer Plan (Including Pre-Closing Capital), company filings, FactSet (as of June 16, 2023), Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
PV of Future Share Value1,2
1A 1B
Illustrative Buyer
Plan (Including
Pre-Closing
Capital) (requires
capital raise)
◼ Based on
Standalone LRP
◼ Assumes no capital
raise
Commentary
◼ Based on Illustrative
Buyer Plan
(Including Pre-Closing Capital)
◼ Assumes illustrative
$475m preferred
capital raise to cover
cash shortfall
5 Alternative considerations
36
Observed public
company multiples Illustrative multiple re-rating
1b
Cost of
equity |
| PRELIMINARY DRAFT
Illustrative implied valuation
State / Market Revenue EBITDA Low High
Texas $136 $44 $263 $351
California 112 36 216 288
North 108 35 209 278
Illinois 88 28 170 227
Pennsylvania 54 17 104 139
Divest select markets – illustrative divestiture options
Sources: Management-provided historical financial information, Standalone LRP, Company website
Notes:
1. Historical state-level 2022A revenue provided by Condor Management
2. Illustratively assumes 2022PF consolidated Condor EBITDA margin of 32%
3. Valuation range illustratively applies 6.0x and 8.0x multiple to EBITDA
1C
◼ Current state or progress of fiber deployment / potential fiber build in
each asset cluster
◼ Post-tax cash for reinvestment
◼ Ability to solicit buyer interest for state- or market-level assets
◼ Amount of time and resources required to reach divestiture agreement
and close transaction likely to be significant
Condor network
Potentially interested parties (Reg. + PE-backed | National ILECs + FW)
Illustrative implied state / market valuation range Existing Condor network
Considerations for asset sales
3
1 2
5 Alternative considerations
37 |
| PRELIMINARY DRAFT
Sale to financial buyer – key buyer considerations
Company knowledge ◼ Familiarity with the Company, Management and its strategy; interest in copper-to-fiber conversion plays
Competitive dynamics ◼ “Sponsor topping sponsor” dynamic / stalking horse potential
Bandwidth / timeline ◼ Resource allocation / competing processes; timeline given potential for accelerated process
Equity funding
requirements ◼ Size of total equity investment, both upfront equity and growth capital to support fiber deployment
Debt financing ◼ Availability of new debt to recapitalize Condor in current market conditions and / or cost to receive change of control
waiver from debtholders
Equity returns ◼ Returns potential vis-à-vis Seagull returns potential and ability to value the business appropriately
Sign & close
timing ◼ Timeline to close and interim funding required to maintain momentum between sign and close
We believe that the following will impact financial buyers’ interest in Condor
3A
5 Alternative considerations
38 |
| PRELIMINARY DRAFT
New buyer Seagull
Illustrative offer price $4.00 $4.00 $4.00
Shares to purchase 119 119 7 9
(% of FDSO) 100% 100% 67%
Gross equity purchased 475 475 317
(+) Redemption of pref. 583 (+) Redemption of pref. 583
(+) Consent solicitation 2 3
(+) Change of control 1 2
(+) Financing fees 1 (+) Financing fees / OID 7 0 (+) Financing fees / OID 1
(+) Transaction fees 1 7 (+) Transaction fees 1 7 (+) Transaction fees 1 7
(+) Cash to BS 5 0 (+) Cash to BS 5 0 (+) Cash to BS 5 0
(+) Equity funding debt 679
Total upfront equity, net of cash $1,139 $1,877 $375
Additional equity - growth 225 – 225
Total equity investment at $4.00 / share $1,364 $1,877 $601
Total equity investment
$5.00 $1,483 $1,995 $680
6.00 1,602 2,114 759
7.00 1,720 2,233 838
8.00 1,839 2,351 918
Rollover capital structure1 New capital structure1 Rollover capital structure1
Illustrative additional
equity items @ close
Illustrative share price of
Sources: Illustrative Buyer Plan (No Pre-Closing Capital), R&Co financing extrapolations
Note:
1. Based on Illustrative Buyer Plan (No Pre-Closing Capital); Condor Management-provided forecast which accelerates build-plan with access to incremental capital
Sale to financial buyer – required equity capital
Depending on capital structure assumed (new vs. rolled) equity financing needed is at least $1bn
and could be greater than $1.9bn
3A
5 Alternative considerations
39 |
| PRELIMINARY DRAFT
Sale to financial buyer – debt financing perspectives
◼ We estimate maximum available leverage in a new financing structure at ~4.5x
◼ Cost of new debt will be significantly higher than current capital structure
□ When Condor last tapped the high yield market in March 2021, underlying UST were 1.2% and LTM EBITDA was $524m1
◼ It will be difficult to get banks to commit to financing for a deal that will take 12 – 18 months to close
◼ If bank commitments / institutional debt market financing are not available, buyers can access the private credit fund market, though at a slightly
higher cost
◼ Seagull preferred – $583m redemption value – will need to be refinanced with equity
Sources: FactSet, company filings
Notes:
1. As compared to 2023E EBITDA of $321m
2. Assumes 1M CME term SOFR of ~3.5% as of December 31, 2024
3. Assumes $50m of minimum cash at entry
Refinanced cap. structure Portable cap. structure
Entry debt
(12/31/24)
Annualized
interest rate2
Entry gross / net
leverage3
~$2.3bn
~6.5%
~6.4x / ~6.2x
~$1.6bn
~8.5%
~4.5x / ~4.4x
Annualized
interest expense2 ~$140m ~$150m
1. STRATEGIC ALTERNATIVES
Leverage considerations
Illustrative capital structure comparison
New debt financing for an acquisition of Condor will be expensive and difficult to get committed,
highlighting the value of the change of control waiver for financial buyers
3A
5 Alternative considerations
40 |
| PRELIMINARY DRAFT
Source: Company websites
Sale to financial buyer – potential parties
Buyer
Fund
size
($bn)
Relevant investments Likely
interest Comments
$25.0
(2023) Low ◼ Has shown limited interest in copper to fiber
conversion stories
$9.0
(2023) High
◼ Runner up in multiple digital infrastructure trades (Cincinnati
Bell, Point Broadband) – actively seeking U.S. digital infra
platform investment
$8.0
(2021) Low ◼ Well capitalized and active in broadband sector; size of
opportunity may be too large
$8.3
(2022) High ◼ Actively looking for residential broadband play to add
to portfolio
$22.0
(2019) Medium ◼ Formed team focused on digital infrastructure in 2021; have
been receptive to other residential opportunities
$3.8
(2021) Medium ◼ Several platform investments in residential fiber
◼ Recently closed larger fund and looking to move up market
(Topped)
(NZ)
PE / infrastructure funds
1. STRATEGIC ALTERNATIVES
3A
5 Alternative considerations
41 |
| PRELIMINARY DRAFT
Source: Company websites
Note:
1. Represents private equity fund
Sale to financial buyer – potential parties (cont’d)
Buyer
Fund
size
($bn)
Relevant investments Likely
interest Comments
$11.5
(2023) Medium
◼ Long-term investors in fiber / cable landscape
◼ Represents attractive opportunity for pocket of infra-like capital
$15.0
(2022) High ◼ Deep pockets with significant experience in digital
infrastructure; looking to expand US presence
$17.0
(2022)
Medium /
Low
◼ Deep pockets and significant experience across different
classes of digital infrastructure (both wireless and broadband),
but already levered to residential via Metronet
$5.5
(2019) Medium ◼ Experienced infrastructure investor; size may be an issue
$14.0
(2022) Medium
◼ Deep pockets with comfort around complex situations (i.e.,
overbuild, network conversion); Astound financial
performance may create less interest for additional residential
exposure
$8.7
(2022)1 Medium ◼ Large-cap PE fund with global experience with fiber / telecom
investments
Infrastructure
PE / infrastructure funds
Infrastructure
1. STRATEGIC ALTERNATIVES
3A
5 Alternative considerations
42 |
| PRELIMINARY DRAFT
Sale to / merger with strategic buyer – key buyer
considerations
Form of consideration
◼ Ability to pay in either stock vs. cash consideration
◼ Recent trading performance of shares and expected response by the market
◼ Long-term equity story for combined company
Synergies ◼ Expected synergies, timeframe to realize cost savings and framing the appropriate acquisition adjusted multiple to the
market
Capital structure
◼ Impact to pro-forma capital structure / leverage profile
◼ Ability and / or need to refinance capital structure
◼ Go-forward capital requirements and funding strategy / availability of capital
Timing
◼ Ability to take on integration / additional build in context of their own strategy
◼ Current valuation relative to Condor takeout valuation
Regulatory review ◼ Potential to have to sell overlapping states (for non-ILEC acquirors)
1. STRATEGIC ALTERNATIVES
3B
5 Alternative considerations
43 |
| PRELIMINARY DRAFT
Sale to / merger with strategic buyer – potential parties
Strategic buyer Est. EV
($bn)
EV / LTM
EBITDA Rationale Comments
Public
$6bn 7.0x
◼ Previously significantly acquisitive with fiber investments made
through JVs and acquisition with Clearwave and Hargray,
respectively
◼ Continues to evaluate M&A despite stock price
revaluation back in line with peers
◼ Large capital outlay to acquire GTCR’s MBI3 stake
may use firepower
$13bn 6.7x
◼ Scale economics
◼ Positions company as sector consolidator
◼ Current debt capacity limited / would likely need to
use stock as consideration
◼ Undergoing their own large-scale fiber build with
ongoing funding constraints
$23bn 3.5x ◼ Strategic value creation through migration of Condor enterprise
business to Level 3
◼ Aggressively trying to exit much of its residential
business
◼ Limited capital – restructuring potential in future
$1bn 15.1x
◼ Multiple similarities between businesses
◼ Undergoing fiber greenfield effort that has been well-received by
the market
◼ Shentel looking for transformational acquisition
◼ Size may present challenges
Private
$3bn1
7.6x1
◼ Large synergy potential
◼ Deep familiarity with FTTH investments
◼ Macquarie has significant capital available for
M&A and investment to support Altafiber
◼ Furthers efforts to refocus on broadband
$7.5bn1
5.5x1
◼ Operational synergies / efficiencies
◼ Attractive geographic proximity to Condor footprint
◼ Brightspeed bank group has been unable to fully
syndicate Apollo acquisition financing
◼ Early returns on performance unclear
$3.5 -
4.0bn2
4.0 -
4.5x2
◼ Large synergy potential
◼ Provides Elliott better path to IPO option given larger scale
◼ Historical relationships with Seagull
◼ Elliott focused on exit – would consider if it
improves optionality
Sources: Wall Steet research, company filings, FactSet (as of June 16, 2023)
Notes:
1. Represents transaction value and multiple
2. Based on Windstream's reorganization and rights offering
3. Cable One will have the option from 1Q23 – 2Q24 to acquire the direct and indirect interest in MBI not
held by Cable One. If not exercised, GTCR will have a put option in 3Q25 to sell their position in MBI
Strategic buyer universe likely limited to other large cap broadband companies
Other potential large-cap strategics
1. STRATEGIC ALTERNATIVES
3B
5 Alternative considerations
44 |
| PRELIMINARY DRAFT
Strategic
buyer
LTM
EBITDA
($m)1
Strategic
fit Synergy potential Leverage1 WACD Stock price %
of 52-wk high Comments
Public
$890 3.8x 7.9% 47%
◼ Despite share price revaluation, the company
remains active in evaluating potential M&A
opportunities
1,895 3.7x 10.6% 58% ◼ Undergoing similar large-scale fiber overbuild
strategy
6,167 4.2x 15.0% 20% ◼ Currently experiencing competitive,
macroeconomic and financial pressures
72 3.9x 7.5% 78% ◼ Size of Condor transaction could be
challenging to Shentel
Private
405 4.8x 11.4% n.a.
◼ Accelerating fiber build plans following take-private by Macquarie in Sep-2021
1,3642 n.a. 12.8% n.a. ◼ Limited access to debt financing
1,7433 n.a. 12.5% n.a.
◼ Owned by Elliott Management which is more
focused on path to sell the business than
reinvestment
Condor $349
5.3 / 6.7x
(incl. / excl.
preferred)
Sources: Wall Steet research, company filings, FactSet (as of June 16, 2023)
Notes:
1. LTM EBITDA and leverage as of transaction announcement for private strategic buyers
2. 2020E adj. EBITDA
3. LTM as of FY2019
1. STRATEGIC ALTERNATIVES
Sizing Access to capital
Sale to / merger with strategic buyer – detailed assessment
5 Alternative considerations
45
3B |
| Appendix
46 |
| Appendix
Additional valuation support
A
47 |
| PRELIMINARY DRAFT
Share %52w Market Enterprise EV / Sales EV / EBITDA Sales Growth
$m, unless noted price ($) high capitalization value 2023E 2024E 2023E 2024E
Condor (Standalone LRP) $2.76 33% $328 $2,767 2.47x 2.42x 8.6x 7.6x
Condor (Consensus) $2.76 33% $328 $2,767 2.48x 2.46x 8.7x 8.2x
ILEC
Lumen $2.25 20% $2,321 $23,442 1.60x 1.66x 5.0x 5.2x
Frontier $17.57 58% 4,448 13,070 2.26x 2.25x 6.3x 6.0x
Mean / median 1.93x 1.96x 5.6x 5.6x
Rural cable
Cable One $675.64 47% $3,901 $6,367 3.81x 3.83x 6.9x 6.8x
Shentel $20.12 78% 1,033 1,079 3.80x 3.37x 13.3x 11.5x
Mean / median 3.80x 3.60x 10.1x 9.2x
Cable
Charter $341.24 69% $58,415 $154,399 2.80x 2.73x 7.0x 6.7x
Altice $2.98 25% 1,420 26,256 2.85x 2.90x 7.4x 7.3x
WOW $7.84 38% 671 1,458 2.07x 2.04x 5.1x 4.8x
Mean 2.57x 2.56x 6.5x 6.3x
Median 2.80x 2.73x 7.0x 6.7x
Broadband
ATN International $39.60 80% $638 $1,162 1.50x 1.47x 6.2x 5.6x
Overall peer mean 2.59x 2.53x 7.1x 6.7x
Overall peer median 2.53x 2.49x 6.6x 6.4x
Selected public company analysis: valuation benchmarking
A Additional valuation support – Public trading comparables
Sources: company filings, FactSet (as of June 16, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Condor share price as of April 12, 2023; all other companies as of June 16, 2023
2. Condor 52-week high as of April 12, 2023; all other companies as of June 16, 2023
3. Balance sheet as of March 31, 2023 as per Condor Management; Condor Management-provided FDSO of 118.7m as of May 31, 2023
4. Metrics based on Standalone LRP
5. Metrics based on median consensus estimates
6. Lumen capitalization pro forma for divestiture of EMEA Business
3,4
1
3,5
6
2
A Appendix — Additional valuation support
48 |
| PRELIMINARY DRAFT
Enterprise value ($m) PV of terminal value as % of EV Implied share price Implied terminal multiple
at PGR of at PGR of at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $3,136 $3,219 $3,308 $3,402 $3,504 76% 77% 77% 78% 79% $5.86 $6.57 $7.31 $8.11 $8.97 6.5x 6.8x 7.0x 7.3x 7.6x
9.75% 3,008 3,085 3,167 3,254 3,347 76% 76% 77% 77% 78% 4.79 5.44 6.13 6.86 7.65 6.3x 6.6x 6.8x 7.0x 7.3x
10.00% 2,889 2,960 3,035 3,116 3,202 75% 76% 76% 77% 77% 3.78 4.38 5.02 5.70 6.42 6.2x 6.4x 6.6x 6.8x 7.0x
10.25% 2,776 2,842 2,912 2,987 3,066 74% 75% 76% 76% 77% 2.84 3.39 3.98 4.61 5.28 6.0x 6.2x 6.4x 6.6x 6.8x
10.50% 2,670 2,732 2,797 2,865 2,939 74% 74% 75% 76% 76% 1.94 2.46 3.01 3.59 4.20 5.8x 6.0x 6.2x 6.4x 6.6x
$m Q2-Q4'23E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Total revenue $843 $1,145 $1,209 $1,284 $1,333 $1,396 $1,456 $1,517 $1,557 $1,557
% growth n.m. 5.6% 6.2% 3.8% 4.7% 4.3% 4.2% 2.6%
Adj. EBITDA 245 362 434 527 599 652 694 746 772 772
% margin 29.1% 31.6% 35.8% 41.0% 44.9% 46.7% 47.7% 49.2% 49.6%
(-) One-time items (10) (15) (13) (15) (15) (15) (15) (15) (15) (15)
(-) D&A (345) (319) (239) (204) (185) (226) (264) (283) (276) (202)
EBIT (109) 28 182 307 398 410 415 449 481 555
(-) Tax at 26% marginal rate - - (7) (47) (80) (104) (107) (108) (117) (125) (144)
NOPAT (109) 20 135 227 295 304 307 332 356 411
(+) D&A 345 319 239 204 185 226 264 283 276 202
(-) CapEx (315) (356) (284) (274) (319) (318) (336) (231) (221) (202)
(-) Stock-based compensation (7) (10) (10) (10) (10) (10) (10) (10) (10) (10)
(+/-) Source / (use) of NWC (59) 1 17 (23) (1) 12 (5) (10) (2) (2)
Unlevered FCF ($146) ($25) $97 $124 $150 $214 $221 $363 $399 $398
Terminal
period
Illustrative discounted cash flow analysis
Projected cash flows1
2. STANDALONE LRP
Sources: Standalone LRP, company filings, Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Projected unlevered cash flows per Standalone LRP
2. Terminal period assumptions per Condor Management and approved by the Special Committee; D&A assumed
equal to CapEx per Condor Management
3. Per Condor Management, one-time items are tax deductible; stock-based compensation not tax deductible
2
6 7
4. 26% tax rate as per Condor Management
5. 75% of full year 2023E D&A per Condor Management and approved by the
Special Committee
6. Valuation date as of March 31, 2023
7. Balance sheet as of March 31, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of May 31, 2023
5
4
3
3
6
A Appendix — Additional valuation support
49 |
| PRELIMINARY DRAFT
$m Q2-Q4'23E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Memo: Taxable income ($171) $17 $114 $197 $265 $274 $277 $302 $324
Restricted NOLs utilized - - 17 114 9 - - - - - - - - - -
Unrestricted NOLs utilized - - - - - - 150 175 - - - - - - - -
Total NOLs used - - 17 114 160 175 - - - - - - - -
(x) Tax rate 26% 26% 26% 26% 26% 26% 26% 26% 26%
FV of NOL benefit - - 4 30 42 45 - - - - - - - -
Illustrative NOL valuation analysis
Projected NOL utilization1,2
3
4
6
1. Projected NOL generation and utilization per Standalone LRP
2. Valuation date as of March 31, 2023
3. Restricted NOLs generated prior to 2018
4. Unrestricted NOLs generated during or after 2018; subject to 80% of taxable income limitation
Sources: Standalone LRP, company filings, Bloomberg (as of June 16, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
5. 26% tax rate as per Condor Management
6. Balance sheet as of March 31, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of May 31, 2023
5
Discount Cumulative Incr. value
rate PV per share
9.50% $90.0 $0.76
9.75% 89.4 0.75
10.00% 88.7 0.75
10.25% 88.1 0.74
10.50% 87.4 0.74
A Appendix — Additional valuation support
50 |
| PRELIMINARY DRAFT
Overview of selected Standalone LRP value drivers
Driver Standalone LRP assumption
Standalone LRP metric
2023E 2027E 2031E
Residential fiber penetration rate
◼ Each residential fiber build cohort reaches terminal
penetration rates of 40% by year 6 (at a market level) 16.7% 33.2% 37.4%
Cost per passing (pre-CWIP / Inventory)
◼ Cost per home passed increases steadily from 2023E
to 2027E as RDOF requirements are fulfilled; cost
levels off thereafter as focus shifts to highest %IRR
passings and BEAD impact ramps
~$475 ~$1,500 n.a.
Enterprise & carrier sales growth
◼ Enterprise & carrier sales recover to 2019A levels
by 2031E; represents CAGR over the 2019A – 31E
period of 0.2% p.a.
(2.6%) 0.4% 1.4%
Non-video COGS (% of sales)
◼ 150bps improvement vs. 2023E in 2024E with
subsequent 50bps p.a. improvements from
2025E - 27E
15.0% 12.0% 12.0%
Adj. EBITDA margin
◼ Margin expansion as fiber build-out leads to improved
operating leverage and decreased marketing spend
per subscriber
28.8% 45.1% 49.6%
CapEx intensity (% of sales)
◼ CapEx costs represent fiber build costs, success-based CapEx driven by penetration growth and
maintenance CapEx
41.3% 24.0% 14.2%
Source: Standalone LRP
(Blended penetration)
A Appendix — Additional valuation support
51
(CAGR since 2022A) |
| PRELIMINARY DRAFT
Market Debt Pref. Debt / Debt / Tax Beta
Peer cap ($m) ($m) eq. ($m) equity cap rate (%) Levered Unlevered Re-levered
Frontier $4,448 $9,842 – 221% 69% 25% 1.10 0.41 0.72
Cable One 3,901 3,844 – 99% 50% 25% 1.02 0.58 1.02
Shentel 1,033 102 – 10% 9% 25% 0.98 0.91 1.58
WOW 671 800 – 119% 54% 25% 1.10 0.58 1.01
ATN International 638 524 – 82% 45% 25% 0.72 0.45 0.78
75th percentile 54% 1.10 0.58
Mean 45% 0.98 0.59
Median 99% 50% 1.02 0.58
25th percentile 45% 0.98 0.45
Condor $328 $2,195 $488 819% 89% 26% 1.06 0.15 0.26
Implied levered beta Implied cost of equity Implied cost WACC
Gross Gross Pre-tax cost at unlevered beta of at unlevered beta of at unlevered beta of
debt / cap debt / equity of debt 0.50 0.58 0.60 0.50 0.58 0.60 0.50 0.58 0.60
25.0% 33.3% 10.1% 0.62 0.72 0.75 10.4% 11.1% 11.3% 9.7% 10.2% 10.3%
35.0% 53.8% 10.1% 0.70 0.81 0.84 10.9% 11.7% 11.9% 9.7% 10.2% 10.3%
49.6% 98.5% 10.1% 0.86 1.00 1.04 12.0% 13.0% 13.2% 9.8% 10.2% 10.4%
55.0% 122.2% 10.1% 0.95 1.10 1.14 12.6% 13.6% 13.9% 9.8% 10.2% 10.4%
65.0% 185.7% 10.1% 1.19 1.37 1.42 14.2% 15.5% 15.8% 9.8% 10.3% 10.4%
Cost of equity
Risk-free rate 4.1%
Levered beta 1.00
Equity risk premium 6.8%
Size premium 2.2%
Cost of equity 13.0%
Cost of debt
Cost of debt (pre-tax) 10.1%
Tax shield (2.6%)
Cost of debt (post-tax) 7.4%
Weighted average cost of capital (WACC)
Selected public company beta analysis
Implied WACC
Based on CAPM analysis and
historical trading yields,
estimated WACC range for
Condor is 9.5 - 10.5%
1
2
3
3
4
5
6
7
8
9 10 10 8
1. Based on median gross debt to capital ratio of peer references
2. Based on peer median 2-year adjusted historical beta (weekly periodicity, regressed against S&P 500) per
Bloomberg (as of June 16, 2023)
3. Unlevered beta = Bloomberg adjusted beta ÷ ( 1+ ( 1 – marginal tax rate) × D/E )
4. Based on current yield on 20-year US Treasury (as of June 16, 2023)
5. Based on the average of Kroll’s Supply-side ERP methodology (6.4%) and Historical ERP methodology
(7.2%) per Kroll’s Cost of Capital Guide (as of December 31, 2022)
6. Based on Kroll’s size premia analysis per Kroll’s Cost of Capital Guide (9th decile, as of December 31, 2022)
Sources: company filings, FactSet (as of June 16, 2023 and April 12, 2023), Bloomberg (as of June 16, 2023 and April 12, 2023), US Federal Reserve, Kroll Cost of Capital Guide, Pitchbook LCD Research
Notes:
7. Average of Single-B new-issue first-lien yield to maturity (Pitchbook LCD Research)
and Single-B US High Yield Index Semi-Annual Yield to Worst (FRED)
8. 26% tax rate as per Condor Management
9. Condor beta and share price as of April 12, 2023; Balance sheet as of March 31,
2023 as per Condor Management; Condor Management-provided FDSO of 118.7m
as of May 31, 2023
10. Illustratively includes preferred equity as debt-like item
A Appendix — Additional valuation support
52 |
| PRELIMINARY DRAFT
–
$2.00
$4.00
$6.00
$8.00
$10.00
-
20%
40%
60%
80%
100%
Jun-21 Dec-21 Jun-22 Dec-22 Jun-23
% of ratings
Buy Hold Sell Share price Target price
Analyst price targets
Sources: FactSet (as of June 16, 2023), Bloomberg (as of June 16, 2023)
Notes:
1. Target prices based on 100-day consensus window
2. Selection excludes SADIF Investment Analytics, which has not updated its target price since January 2023
Analyst sentiment over time1 Analyst price targets2
Number of broker recommendations
4 4 4 4 4
Target price as of Unaffected date
Current price target
Average target price over time1
$4.50
$2.50
$4.00
$4.00
$3.50
$4.00
$ actual Jun-21 Dec-21 Jun-22 Dec-22 Jun-23
Average target price $7.33 $8.17 $5.83 $5.83 $3.83
% Premium (16.6%) 9.2% (16.7%) 62.9% 3.6%
A Appendix — Additional valuation support
53
Memo: $3.74 based on DCF
Memo: $2.67 based on DCF and $2.74 based
on 9.0x 2023 EV / EBITDA
Memo: $4.00 based on DCF |
| Appendix
Other supporting materials
B
54 |
| PRELIMINARY DRAFT
CAGR
$m, unless noted 2020PF 2021PF 2022PF 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E (23-27) (27-31)
Residential fiber $126 $210 $327 $460 $563 $643 $686 $715 $737 45% 7 %
Resi copper, video, voice 328 301 276 252 224 205 187 171 156 (9%) (9%)
SMB 9 1 8 7 8 5 8 6 8 9 9 1 9 4 9 6 9 8 (0%) 2 %
Enterprise1 295 295 300 309 322 335 347 357 367 2 % 3 %
Carrier2
144 136 139 141 143 144 146 147 149 (0%) 1 %
Other3 135 127 120 114 108 102 9 7 9 3 8 8 (6%) (5%)
Revenue $1,238 $1,222 $1,145 $1,119 $1,156 $1,247 $1,362 $1,449 $1,521 $1,557 $1,580 $1,595 7 % 2 %
% growth n.a. (1%) (6%) (2%) 3 % 8 % 9 % 6 % 5 % 2 % 1 % 1 %
Gross profit $1,090 $1,066 $997 $881 $936 $1,028 $1,142 $1,235 $1,299 $1,331 $1,351 $1,365 9 % 3 %
% margin 88% 87% 87% 79% 81% 82% 84% 85% 85% 85% 86% 86%
Adj. EBITDA4 $462 $442 $369 $321 $356 $440 $559 $669 $740 $759 $768 $774 20% 4 %
% margin 37% 36% 32% 29% 31% 35% 41% 46% 49% 49% 49% 49%
Unlevered free cash flow5
($134) ($40) $47 $293 $356 $385 $400 $413 n.a. 9 %
% margin (12%) (3%) 3% 20% 23% 25% 25% 26%
Memo:
CapEx ($479) ($474) ($428) ($401) ($224) ($243) ($217) ($211) ($203) (17%) (2%)
CapEx % of sales 43% 41% 34% 29% 15% 16% 14% 13% 13%
Change in working capital (19) 9 2 (15) (15) 1 1 (3) (1) (1) (5%) (49%)
EBITDA - CapEx ($158) ($118) $12 $157 $445 $497 $542 $557 $571 n.a. 6 %
% conversion (49%) (33%) 3% 28% 67% 67% 71% 73% 74%
Cost / Passing $615 $822 $917 $1,178 n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Notes:
1. Enterprise revenue includes other commercial revenue (non-recurring and other services including
business systems, joint pole & special projects, commercial video services and other services)
2. Carrier revenue includes other carrier revenue (non-recurring and other services including business
systems, joint pole & special projects, commercial video services and other services)
Source: Illustrative Buyer Plan (Including Pre-Closing Capital), PF historical periods (2020-2022) provided by Management (normalized to exclude divestures of Ohio and Kansas City operations and wireless partnerships)
Summary of Illustrative Buyer Plan (Including Pre-Closing Capital)
3. Other revenue includes other subsidy revenue (excluding CAF), CAF / RDOF subsidy
revenue, special access revenue, network / switched access revenue, USF revenue and other
products / services rev.
4. Adj. EBITDA does not account for burden of SBC
5. Unlevered free cash flow per Standalone LRP; calculated as EBIT – taxes + tax depreciation
– CapEx + / - change in NWC; does not consider generated nor utilized NOLs; negative EBIT
results in $0 tax paid
55
B Appendix — Other supporting materials |
| PRELIMINARY DRAFT
CAGR
$ m 2023E 2024E 2025E 2026E 2027E (23-27)
Adj. EBITDA1 $321 $356 $440 $559 $669 20%
% margin 29% 31% 35% 41% 46%
Build (187) (189) (154) (147) – (100%)
Success-based (175) (184) (195) (181) (155) (3%)
Maintenance capex (117) (101) (79) (73) (69) (12%)
CapEx ($479) ($474) ($428) ($401) ($224) (17%)
CapEx % of sales 43% 41% 34% 29% 15%
Adj. EBITDA1
- CapEx ($158) ($118) $12 $157 $445 n.a.
% conversion 2
(49%) (33%) 3 % 28% 67%
Levered free cash flow3
($391) ($317) ($196) ($62) $234 n.a.
% conversion 2
(122%) (89%) (44%) (11%) 35%
Leverage3
6.8x 6.4x 5.1x 4.0x 3.3x n.a.
Memo: Net debt3,4 2,175 2,269 2,245 2,233 2,214 n.a.
Liquidity5 $107 ($209) ($405) ($467) ($249) n.a.
Summary of Illustrative Buyer Plan (Including Pre-Closing Capital) (cont.)
Source: Illustrative Buyer Plan (Including Pre-Closing Capital)
Notes:
1. Adj. EBITDA does not account for burden of SBC
2. Defined as respective metric ÷ Adj. EBITDA
3. Levered free cash flow per Standalone LRP; calculated as EBITDA – taxes – CapEx + / - change in NWC – cash interest – finance lease payments – pension / OPEB contributions – one-time items; does not
contemplate impact of NOL generation / utilization
4. Net debt excludes deferred debt issuance costs
5. Total liquidity based on cash on hand and revolver availability
B Appendix — Other supporting materials
56
Select cash flow and leverage metrics |
| PRELIMINARY DRAFT
CAGR
$m, unless noted 2020PF 2021PF 2022PF 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E (23-27) (27-31)
Residential fiber $126 $195 $294 $414 $515 $611 $664 $703 $729 42% 9 %
Resi copper, video, voice 328 301 278 254 226 207 189 172 158 (9%) (9%)
SMB 9 1 8 7 8 5 8 6 8 9 9 1 9 4 9 6 9 8 (0%) 2 %
Enterprise1 295 295 300 309 322 335 347 357 367 2 % 3 %
Carrier2
144 136 139 141 143 144 146 147 149 (0%) 1 %
Other3 135 127 120 114 108 102 9 7 9 3 8 8 (6%) (5%)
Revenue $1,238 $1,222 $1,145 $1,119 $1,141 $1,216 $1,319 $1,404 $1,491 $1,537 $1,569 $1,589 6 % 3 %
% growth n.a. (1%) (6%) (2%) 2 % 7 % 9 % 6 % 6 % 3 % 2 % 1 %
Gross profit $1,090 $1,066 $997 $881 $923 $1,001 $1,104 $1,195 $1,273 $1,313 $1,342 $1,359 8 % 3 %
% margin 88% 87% 87% 79% 81% 82% 84% 85% 85% 85% 86% 86%
Adj. EBITDA4 $462 $442 $369 $321 $362 $425 $534 $634 $716 $744 $763 $773 19% 5 %
% margin 37% 36% 32% 29% 32% 35% 40% 45% 48% 48% 49% 49%
Unlevered free cash flow5
($19) ($34) $39 $156 $347 $373 $395 $411 n.a. 27%
% margin (2%) (3%) 3% 11% 23% 24% 25% 26%
Memo:
CapEx ($460) ($352) ($409) ($393) ($340) ($230) ($221) ($214) ($205) (7%) (12%)
CapEx % of sales 41% 31% 34% 30% 24% 15% 14% 14% 13%
Change in working capital (20) 3 8 (9) (11) 3 (3) (2) (1) (14%) (42%)
EBITDA - CapEx ($139) $10 $16 $141 $294 $486 $523 $549 $568 n.a. 18%
% conversion (43%) 3% 4% 26% 46% 68% 70% 72% 74%
Cost / Passing $448 $849 $897 $977 $1,050 n.a. n.a. n.a. n.a. 24% n.a.
Notes:
1. Enterprise revenue includes other commercial revenue (non-recurring and other services including
business systems, joint pole & special projects, commercial video services and other services)
2. Carrier revenue includes other carrier revenue (non-recurring and other services including business
systems, joint pole & special projects, commercial video services and other services)
Source: Illustrative Buyer Plan (No Pre-Closing Capital), PF historical periods (2020-2022) provided by Management (normalized to exclude divestures of Ohio and Kansas City operations and wireless partnerships)
Summary of Illustrative Buyer Plan (No Pre-Closing Capital)
3. Other revenue includes other subsidy revenue (excluding CAF), CAF / RDOF subsidy
revenue, special access revenue, network / switched access revenue, USF revenue and other
products / services rev.
4. Adj. EBITDA does not account for burden of SBC
5. Unlevered free cash flow per Standalone LRP; calculated as EBIT – taxes + tax depreciation
– CapEx + / - change in NWC; does not consider generated nor utilized NOLs; negative EBIT
results in $0 tax paid
57
B Appendix — Other supporting materials |
| PRELIMINARY DRAFT
CAGR
$ m 2023E 2024E 2025E 2026E 2027E (23-27)
Adj. EBITDA1 $321 $362 $425 $534 $634 19%
% margin 29% 32% 35% 40% 45%
Build (168) (93) (147) (149) (112) (10%)
Success-based (175) (158) (184) (171) (159) (2%)
Maintenance capex (117) (101) (79) (73) (69) (12%)
CapEx ($460) ($352) ($409) ($393) ($340) (7%)
CapEx % of sales 41% 31% 34% 30% 24%
Adj. EBITDA1
- CapEx ($139) $10 $16 $141 $294 n.a.
% conversion 2
(43%) 3 % 4 % 26% 46%
Levered free cash flow3
($376) ($194) ($195) ($83) $78 n.a.
% conversion 2
(117%) (54%) (46%) (16%) 12%
Leverage3
6.7x 6.5x 5.6x 4.4x 3.7x n.a.
Memo: Net debt3,4 2,158 2,340 2,382 2,370 2,352 n.a.
Liquidity5 $261 $67 ($128) ($211) ($148) n.a.
Summary of Illustrative Buyer Plan (No Pre-Closing Capital)
(cont.)
Source: Illustrative Buyer Plan (No Pre-Closing Capital)
Notes:
1. Adj. EBITDA does not account for burden of SBC
2. Defined as respective metric ÷ Adj. EBITDA
3. Levered free cash flow per Standalone LRP; calculated as EBITDA – taxes – CapEx + / - change in NWC – cash interest – finance lease payments – pension / OPEB contributions – one-time items; does not
contemplate impact of NOL generation / utilization
4. Net debt excludes deferred debt issuance costs
5. Total liquidity based on cash on hand and revolver availability
B Appendix — Other supporting materials
58
Select cash flow and leverage metrics |
| PRELIMINARY DRAFT
Interest Price as of
rate Mar-23 6/16/2023 YTM Maturity
Cash and cash equivalents1 $336
$250m RCF due 20272 S + 400 – n.a. n.a. 02-Oct-27
$1,000m senior secured term loan due 2027 S + 350 1,000 86.9% 12.7% 02-Oct-27
$750m secured notes due 2028 6.50% 750 80.3% 11.6% 01-Oct-28
$400m secured notes due 2028 5.00% 400 77.0% 10.8% 01-Oct-28
Finance leases n.a. 45 n.a. n.a. Various
Total debt $2,195
Series A preferred stock 9.00% 488 n.a. n.a. n.a.
Total debt and preferred $2,682
Market capitalization (based on $3.70 stock price) 439
Total capitalization $3,121
LTM Mar-23 adjusted EBITDA $349
Credit statistics Mar-23PF
Gross leverage 6.3x
Gross leverage (including preferred stock) 7.7x
Net leverage 5.3x
Net leverage (including preferred stock) 6.7x
Capital structure overview and observations
As of 3/31/23 | Pricing as of 6/16/23
Capitalization overview ($ in millions)
3
4
5 6
APPENDICES — B. CAPITAL STRUCTURE
7
◼ Seagull is a permitted holder
under the existing term loan and
bonds and therefore can acquire
Condor without a need to
refinance the capital structure
◼ Based on current market
conditions, an alternative buyer
should expect a higher cost of
debt and reduced leverage
(c. 4.0 – 4.5x)
Capital Structure Observations
CCR: B- B3
Senior
secured: B- B3
Outlook: Stable Stable
8
Sources: Company filings, Markit, Bloomberg, S&P, Moody’s
Notes:
1. Includes short-term investments of $87.95m as per Condor filings
2. Subject to springing maturity on April 2, 2027 if the Term Loans, as of April 1, 2027, are scheduled to mature earlier than March 31, 2028 as per Condor filings
3. RCF interest subject to a 0.25% reduction if the consolidated first lien leverage ratio does not exceed 3.2x as per Condor filings
4. Amended to transition from LIBOR to SOFR on April 19, 2023; CSA is 11.448bps for the one-month interest period, 26.161bps for the three-month period and 42.826bps for the six-month period as per Condor filings
5. Authorized to issue up to 10,000,000 shares of Series A preferred; dividends accrue daily on liquidation preference, payable semi-annually on January 1 and July 1 of each year as per Condor filings
6. At Condor’s election, either in cash or PIK through an accrual of unpaid dividends until October 2, 2027; and solely in cash thereafter as per Condor filings
7. Presented at liquidation preference value
8. Condor Management-provided FDSO of 118.7m as of May 31, 2023
9. LTM metric per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
6.50% secured noted due 2028 and 5.00%
secured notes due 2028 both have first call
dates of October 1, 2023 at 104.875 and
103.750, respectively 9
B Appendix — Other supporting materials
59 |
| PRELIMINARY DRAFT
Seagull
34%
Institutional
investors
45%
Retail/
undisclosed
18%
Insiders
3%
Chart Title
Name Type %SO
1 Seagull Insider 34.0
2 Other insiders Insider 3.2
Other top shareholders
3 BlackRock Passive 9.7
4 Vanguard Passive 5.1
5 Dimensional Passive 3.5
6 Anchorage Capital Hedge Fund 3.3
7 State Street Passive 2.5
8 Wildcat Capital Long-only 2.2
9 Charles Schw ab Passive 1.7
10 Geode Passive 1.3
11 Renaissance Technologies Hedge Fund 1.2
12 Invesco Long-only 1.1
13 Private Management Group Long-only 1.0
14 Private Advisor Group LLC Long-only 0.9
15 Northern Trust Passive 0.7
16 Millennium Mng. Hedge Fund 0.6
17 M&G Investment Management Ltd. Long-only 0.5
18 American Money Mng. Long-only 0.5
19 Principal Global Long-only 0.4
20 Marshall Wace LLP Hedge Fund 0.4
Top 20 shareholders 73.7
Investor details Holding
Condor shareholder base
Source: FactSet (as of June 16, 2023)
Shareholder overview Shareholder base overview
B Appendix — Other supporting materials
60 |
Exhibit (c)(v)
| Project Seashore
Special Committee materials
September 6th, 2023
1 PRELIMINARY DRAFT |
| PRELIMINARY DRAFT
Disclaimer
The accompanying materials were compiled on a confidential basis by Rothschild & Co US Inc. (“Rothschild & Co”) for the use and benefit of the Special Committee (the “Special
Committee”) of the Board of Directors of Consolidated Communications Holdings, Inc. (the “Company” or “Condor”) solely in connection with its evaluation of the transaction referred to
herein.
Neither Rothschild & Co nor any of its affiliates, nor any of its or their respective officers, directors, employees, advisors, agents or representatives, represents or warrants as to the accuracy
or completeness of any of the materials set forth herein. Nothing contained in the accompanying materials is, or shall be relied upon as, a promise or representation as to the past, present
or future.
It should be understood that these materials, including any valuations and/or estimates or projections contained in the accompanying materials, were prepared or derived from information
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completeness of any such information or the achievability of any such valuations and/or estimates or projections. To the extent such information includes any estimates or projections of
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Except where otherwise indicated, this presentation speaks as of the date hereof and is necessarily based upon the information available to Rothschild & Co and financial, stock market and
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analysis contained herein can be deemed more or less important than any other analysis and these analyses must be considered, in their totality, with the oral briefing provided by
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as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting these materials, the Special Committee acknowledges that
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2 |
| PRELIMINARY DRAFT
Contents
Situation update
1
Updated valuation perspectives
3
Review of updated Standalone LRP
2
4
6
11
Appendix
A
21
3 |
| Situation update
1
4 |
| PRELIMINARY DRAFT
Sources: FactSet (as of September 1, 2023), Condor Management, Condor filings, company press releases, news articles
Notes:
1. Fiber securitization raised $1.6bn of new capital with additional access to a $0.5bn variable funding note facility through a delayed draw feature
2. Represents last trading date presented to the Special Committee
Situation update
Since R&Co last presented preliminary valuation analysis to the Special Committee on
June 22nd, a number of Condor and sector developments have occurred
1 Situation update
$3.70 $3.84
Jun-16 Jun-29 Jul-12 Jul-25 Aug-7 Aug-20
Chart Title
Sector / market
developments
Condor
developments
◼ Lead-sheathed cable issues affected sector equity values
□ Prices have largely recovered after the initial impact but
continue to trade meaningfully below 52-week highs
(Frontier: 53% of 52-week high, Lumen: 16% of 52-week high)
◼ Frontier announced a $2.1bn1 securitization of its fiber assets in
the Dallas metro area
□ First-of-its kind for a traditional LEC provider
□ Unlocks investment-grade source of capital to efficiently fund
continued fiber build-out
□ Strong market reaction upon announcement (up 26%), although
prices have settled and stock still trades down from June levels
◼ Interest rate environment remains elevated
□ Capital markets activity remained relatively quiet through the end
of the summer, although base rates are up ~40bps since June
22nd meeting
◼ Announced 2Q23 results on August 8th
□ Initial share price reaction of +2.4%
□ Strong FTTH numbers reflect impact of new go-to-market strategy
□ CapEx remains significantly above budget, resulting in a ~$50m
increase to Condor Management FY23 guidance
◼ Announced sale of WA assets for $73m
□ Expected to close in the second half of 2024
□ Monetization of non-core assets provides additional capital to
manage liquidity / fund fiber build
◼ Announced Project Simplify
□ Cost reduction / operational efficiency strategy expected by
Condor Management to generate ~$30m in run-rate savings
□ Discussed liquidity constraints, underscoring that fiber build
timeline will be a function of available liquidity
◼ Disclosed that take-private proposal is still under consideration
Indexed peer stock price performance since June 162
, 2023
Condor stock price performance since June 162
, 2023
August 8th:
Announces Q2
earnings
Condor AT&T Frontier Verizon
July 9th: WSJ
first reports lead
cable story
High $4.19
Low $3.12
Since June 16th, 2023
(7.2%)
(4.4%)
(8.8%)
+3.8%
(29.8%)
Jun-16 Jun-29 Jul-12 Jul-25 Aug-7 Aug-20 Sep-1
Sep-1
Lumen
5 |
| Review of updated Standalone LRP
2
6 |
| PRELIMINARY DRAFT
Standalone Long-Range Plan – Aug. ‘23 revisions
In August 2023, Condor Management updated the June 2023 Standalone LRP to reflect recent developments to Condor. The following
revisions were made by Condor1
:
◼ Updated remainder of 2023 for Condor Management’s latest “6+6 forecast”
□ Actual financials for January – June 2023 and latest balance sheet
□ Condor Management’s latest view for Q3 and Q4 2023
◼ Adjusted projected operating costs to reflect Project Simplify
□ No impact to 2023
□ Forecasted to generate annualized cost savings of ~$30 million per year in network operation expenses starting in 2024E; initiative commenced in
the second half of 2023
□ Modeled impact of ~$15 - 20m to reflect incremental cost savings above cost efficiencies previously assumed in Standalone LRP
◼ Adjusted for impact of Washington asset divestiture
□ Cash proceeds for sale of assets ($73m of gross proceeds; net proceeds of ~$65m)
□ Expected to close in Q3 2024
□ Revenues and corresponding direct costs removed from model starting in Q3 2024
Despite these revisions, the Standalone LRP continues to reflects a build-out cadence that allows Condor to remain within its current liquidity
constraints with minimal cushion over the next few years (now reaching a low point in liquidity of $20m in 2025)
◼ Given limited liquidity, minor fluctuations to the Standalone LRP would result in liquidity issues unless the fiber build-out is slowed further, subscriber
growth is pursued less aggressively or paused, and / or new outside capital is injected (which may have a dilutive impact to current shareholders)
Condor Management also made these revisions to the Illustrative Buyer Plan (No Pre-Closing Capital)
◼ This plan, prepared for the purposes of evaluating a potential buyer’s ability to pay and utilized by Rothschild & Co for certain non-core analyses,
assumes a build rate in line with the Standalone LRP through an illustrative transaction close date of 12/31/24, and assumed reacceleration of the
build (requiring additional capital) post-close
1
2
3
2 Review of updated Standalone LRP
Source: Condor Standalone Long-Range Plan per Condor Management and approved by the Special Committee (“Standalone LRP”)
Note:
1. Standalone LRP also updated to reflect latest interest rate expectations 7 |
| PRELIMINARY DRAFT
August 2023 vs. June 2023 Standalone LRP
$m
2 Review of updated Standalone LRP
Source: Standalone LRP
Adj. EBITDA
CapEx Levered free cash flow
August 2023
June 2023
Revenue
1,119 1,145
1,209
1,284
1,333
1,396
1,456
1,517
1,557
1,115 1,128
1,185
1,264
1,316
1,382
1,443
1,505
1,547
2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
321 362
434
527
599
652 694
746 772
327 360
436
526
601
657 699
751 781
2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
460
356
284 274
319 318 336
231 221
495
359
285 274
319 318 334
231 220
2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
(376)
(201)
(48)
11
68
16 40
190
234
(409)
(205)
(71)
23
71
17 43
184
237
2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
8 |
| PRELIMINARY DRAFT
Summary of Standalone LRP
2 Review of updated Standalone LRP
Notes: Financials as presented include WA results until transaction close in 2024
1. Enterprise revenue includes other commercial revenue (non-recurring and other services including
business systems, joint pole & special projects, commercial video services and other services)
2. Carrier revenue includes other carrier revenue (non-recurring and other services including business
systems, joint pole & special projects, commercial video services and other services)
3. Other revenue includes other subsidy revenue (excluding CAF), CAF / RDOF subsidy revenue, special
access revenue, network / switched access revenue, USF revenue and other products / services rev.
4. Adj. EBITDA excludes cost of stock-based compensation (“SBC”)
5. Unlevered free cash flow per Standalone LRP; calculated as EBIT – taxes + tax depreciation –
CapEx + / - change in NWC + net proceeds from asset divestitures; does not consider generated
nor utilized NOLs; negative EBIT results in $0 tax paid; contemplating H2-2023 unlevered free
cash flow for purposes of valuation
6. Defined as respective metric ÷ Adj. EBITDA
Sources: Standalone LRP, pro forma historical periods (2020-2022) provided by Condor Management (normalized to exclude divestures of Ohio and Kansas City operations and wireless partnerships)
9
6 |
| PRELIMINARY DRAFT
Summary of Standalone LRP (cont’d)
2 Review of updated Standalone LRP
Select cash flow and leverage metrics
Source: Standalone LRP
Notes: Financials as presented include WA results until transaction close in 2024
1. Adj. EBITDA excludes cost of SBC
2. Defined as respective metric ÷ Adj. EBITDA
3. Levered free cash flow per Standalone LRP; calculated as Adj. EBITDA – cash taxes (net of NOLs) – CapEx
+ / - change in NWC – cash interest – finance lease payments – pension / OPEB contributions – one-time items;
does not reflect movements in revolver or net proceeds from asset divestitures
4. Leverage defined as net debt ÷ Adj. EBITDA; does not contemplate additional potential add-backs allowed by debt covenants
5. Net debt excludes deferred debt issuance costs
6. Total liquidity based on cash on hand and revolver availability
10 |
| Updated valuation perspectives
3
11 |
| PRELIMINARY DRAFT
Preliminary assessment of valuation methodologies
12
3. Financials through 2024E adjusted for pro forma impact of WA divestiture per Condor Management
4. NPV of WA proceeds and interim cash flows treated as cash-like item for purposes of EV bridge ($68m; see p. 22)
5. NOL schedule based on Standalone LRP
6. Current analyst target prices based, in part, on take-out price; intrinsic represents DCF-based analysis;
Selection excludes SADIF Investment Analytics
Notes:
1. Rounded to neared $0.25 except for 52-week high / low and analyst target prices
2. Per Condor Management, assumes 118.7m fully diluted shares outstanding, net debt
of $1.99bn, net, tax-effected PBO and OPEB of $94.5m, NCI of $8.0m,
Investments of $9.1m and preferred equity valued at liquidation preference of $498.3m
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
3 Updated valuation perspectives
Methodology Per-share value ($ actual)1,2 Implied EV ($bn)2 Assumptions
Core methodologies
Selected
public company
analysis
EV / 2024E
Revenue3
$2.5 – 3.14
◼ EV / 2024E Revenue: 2.25x – 2.75x
EV / 2024E
Adj. EBITDA3
$1.9 – 2.54
◼ EV / 2024E Adj. EBITDA multiple: 5.5x – 7.0x
EV / 2025E
Adj. EBITDA $2.4 – 3.04
◼ EV / 2025E Adj. EBITDA multiple: 5.5x – 7.0x
Selected precedent
transactions
EV / LTM Q2’23
Adj. EBITDA3
$1.9 – 3.04
◼ EV / LTM Adj. EBITDA: 6.0x – 9.4x
Illustrative discounted
cash flow analysis $2.9 – 3.7
◼ PGR: 1.5 – 2.5%
◼ WACC: 9.5 – 10.5%
◼ Valuation date as of 6/30/2023
Other references
Premia paid
analysis
All-cash
going private
transactions
$3.0 – 3.14 ◼ 35 – 80% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
All-cash
acquisitions $2.9 – 3.04 ◼ 21 – 53% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
Other
metrics
52-week
high / low $2.8 – 3.24 ◼ 52-week trading high and low closing prices
as of September 1, 2023
Analyst target
prices
Unaffected
$2.8 – 3.04 ◼ Represents low and high of analyst target prices
as of April 12, 20236
Analyst target
prices
Current
$3.0 – 3.04 ◼ Represents low and high of analyst target prices
as of September 1, 20236
Analyst target
prices
Intrinsic
$3.0 – 3.14 ◼ Represents low and high of analyst DCF-based
valuations as of September 1, 20236
n.m.
n.m.
n.m.
n.m.
2.50
3.75
3.25
2.15
2.50
3.75
3.94
4.75
4.50
4.00
9.75
5.00
4.25
5.97
4.50
4.00
4.72
April 12 Seagull proposal: $4.00 th closing price: $2.76
3.25
Incl. NOL value5
3.92
Current trading implies 8.4x
’24E EBITDA
10.50
Seagull verbal indication: $4.20
7.1x multiple
implies $0 of
equity value |
| PRELIMINARY DRAFT
Enterprise value ($m) Implied terminal multiple
at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $3,354 $3,440 $3,533 $3,631 $3,737 6.6x 6.8x 7.1x 7.3x 7.6x
9.75% 3,223 3,303 3,388 3,479 3,576 6.4x 6.6x 6.8x 7.1x 7.3x
10.00% 3,100 3,174 3,253 3,337 3,426 6.2x 6.4x 6.6x 6.8x 7.1x
10.25% 2,985 3,053 3,126 3,204 3,286 6.0x 6.2x 6.4x 6.6x 6.9x
10.50% 2,876 2,940 3,007 3,079 3,155 5.9x 6.0x 6.2x 6.4x 6.6x
Implied share price Implied share price (incl. NOLs)
at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $6.51 $7.24 $8.02 $8.85 $9.74 $7.18 $7.91 $8.69 $9.52 $10.41
9.75% 5.41 6.08 6.80 7.57 8.38 6.07 6.75 7.46 8.23 9.05
10.00% 4.37 5.00 5.66 6.37 7.12 5.03 5.66 6.32 7.03 7.78
10.25% 3.40 3.98 4.60 5.25 5.94 4.05 4.63 5.25 5.90 6.60
10.50% 2.49 3.02 3.59 4.20 4.84 3.13 3.67 4.24 4.85 5.49
Illustrative discounted cash flow analysis
13
3 Updated valuation perspectives
3
Sensitized valuation range1,2
4 4,5 Terminal value accounts for approximately
71 – 77% of DCF enterprise value
Sources: Standalone LRP, company filings, Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Projected unlevered cash flows as per Standalone LRP
2. Terminal period assumptions per Condor Management and approved by
the Special Committee; D&A assumed equal to CapEx per Condor Management
3. Valuation date as of June 30, 2023
4. Valuation date as of June 30, 2023 as per Condor Management;
Condor Management-provided FDSO of 118.7m as of July 31, 2023
5. Reference NOL valuation on p. 25 |
| PRELIMINARY DRAFT
DCF sensitivity to varying operating assumptions
Does not contemplate illustrative impacts to liquidity and NOL usage
14
3 Updated valuation perspectives
3.73
n.m.
5.07
3.04
4.70
1.01
4.53
7.30
7.48
6.08
7.50
6.63
6.12
7.40
Implied per-share DCF midpoint range Base assumption 1,2,3 Item
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Sensitivity analyses vs. Standalone LRP
2. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
3. Assumes WACC of 10.0% and PGR of 2.0%
Enterprise sales
growth rate
◼ Enterprise sales decline ~1% in
2023E and grow at a CAGR of
~3.1% from 2024 – 2031E
~3.1%
0% 5%
~50.5%
45% 51% ◼ Adj. EBITDA margin reaches ~50.5%
by 2031E
Terminal
Adj. EBITDA
margin
Residential fiber
terminal
penetration
◼ Residential fiber cohorts reach 40%
penetration by year 6
Cost per home
passed
◼ Blended cost per home passed
increases from ~$850 in 2024 to
~$1,250 by 2027, dropping to ~$725
thereafter (pre-CWIP / Inventory)
Sensitivity range
35% 45%
40%
-$200
vs. base
+$200
vs. base
~$850 – ~1,250; ~$725
Non-video
COGS %
of sales
◼ COGS % of sales decline from
~15.1% in 2023E and stepped down
to 12.0% by 2027E;
held at 12.0% through 2031E
Terminal CapEx
% of sales
◼ “Steady-state” CapEx estimated at
13% of sales in terminal period 10%
13%
15%
Base DCF (ex. NOLs)
midpoint: $5.66
Residential fiber
ARPU growth rate
◼ Existing residential fiber subscriber
ARPU grown at 4.0% p.a.;
new cohort residential fiber
subscriber ARPU grown at 5.0% p.a
~15.0 – 12.0%
-100 bps
vs. base
+100 bps
vs. base
0%;1% 5%; 6%
4%; 5% |
| PRELIMINARY DRAFT
Long-term EBITDA margins: additional context
DCF highly sensitive to long-term EBITDA margins – projected 50% margin at high end of range
based on comparable data
15
3 Updated valuation perspectives
30%
36%
39%
41%
54%
34%
46%
30%
41% 41% 41%
55%
36%
51% 50.5%
Med: 40%
Med: 41%
Illustrative terminal EBITDA margin of 50.0%
Illustrative terminal EBITDA margin of 47.5%
Illustrative terminal EBITDA margin of 45.0%
Condor3
2031E
margin
Current Cable margins1 Future ILEC
margins2
Selected EBITDA margin data points Sensitized per-share DCF valuation ranges4,5
Implied share price at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $3.93 $4.60 $5.31 $6.07 $6.89
9.75% 2.92 3.54 4.19 4.90 5.65
10.00% 1.97 2.54 3.15 3.80 4.49
10.25% 1.08 1.61 2.18 2.77 3.41
10.50% 0.24 0.74 1.26 1.81 2.40
Implied share price at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $6.11 $6.83 $7.60 $8.42 $9.30
9.75% 5.02 5.69 6.40 7.15 7.96
10.00% 4.00 4.62 5.27 5.97 6.71
10.25% 3.04 3.61 4.22 4.86 5.55
10.50% 2.14 2.67 3.23 3.83 4.46
Implied share price at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $1.72 $2.34 $2.99 $3.70 $4.45
9.75% 0.79 1.36 1.97 2.61 3.31
10.00% – 0.45 1.01 1.60 2.24
10.25% – – 0.11 0.66 1.25
10.50% – – – – 0.32
EBITDA margin range:
High
Low
Sources: FactSet (as of September 1, 2023); Wall Street research
Notes:
1. Based on range of 2023E EBITDA margin estimates of Wall Street research analysts
2. Based on range of furthest reported period EBITDA margin estimates of Wall Street research
analysts; Frontier margin range based on selected data points between 2028 through 2031;
Lumen margin range based on selected data points between 2027 through 2030
3. Based on 2031E EBITDA margin of the Standalone LRP
4. Sensitivity analyses vs. Standalone LRP
5. Valuation date as of June 30, 2023 as per Condor Management; Condor Management-provided
FDSO of 118.7m as of July 31, 2023 |
| PRELIMINARY DRAFT
$2.76
$3.57
$6.45
$9.93
$12.15
$13.08
$0.79
$3.40
$6.59
$8.72
$9.72
n.m.
$0.44
$3.32
$5.32
$6.42
–
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Unaffected Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E
9.0x 8.0x 7.0x
Illustrative PV of future share value
16
3 Updated valuation perspectives
13.5% cost of equity
PV of Future Share Value1,2,3
NTM EV / Adj. EBITDA:
Observed public
company multiples Illustrative multiple re-rating
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Illustrative share prices based on fully diluted shares outstanding that includes illustrative shares issued from stock-based compensation at average illustrative future share price
2. 2024E EBITDA adjusted for pro forma impact of WA divestiture per Condor Management; NPV of WA proceeds and interim cash flows treated as cash-like item in 2023E enterprise value to equity value bridge
3. 2024E – 2027E enterprise value to equity value bridge per Standalone LRP |
| PRELIMINARY DRAFT
$2.76
$3.57
$6.45
$9.93
$12.15
$13.08
$0.79
$3.40
$6.59
$8.72
$9.72
n.m.
$0.44
$3.32
$5.32
$6.42
–
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Unaffected Dec-23E Dec-24E Dec-25E Dec-26E Dec-27E
9.0x 8.0x 7.0x
Impl. PV of '27E share price at illust. trading multiple of
Illust. '28E
EBITDA
Impl. '28E
margin
6.0x 7.0x 8.0x 9.0x 10.0x
$500 36% n.m. $1.20 $3.13 $5.75 $8.18
550 40% 0.38 2.84 5.22 8.07 10.75
600 43% 0.88 4.29 7.32 10.40 13.33
657 48% 4.05 6.42 9.72 13.08 16.29
700 51% 5.50 7.93 11.51 15.07 18.49
Illustrative PV of future share value: sensitivity analysis
17
3 Updated valuation perspectives
13.5% cost of equity
PV of Future Share Value1,2,3
NTM EV / Adj. EBITDA:
Illustratively assumes 2028E EBITDA is reached at the same annual growth
cadence as base Standalone LRP; liquidity shortfalls or excess cash flow
implied by illustrative EBITDA variances vs. Standalone LRP added as debt
or cash, respectively, to enterprise value to equity value bridge
Sensitivity: PV of 2027E future share value at varying 2028E EBITDAs
Observed public
company multiples Illustrative multiple re-rating
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Illustrative share prices based on fully diluted shares outstanding that includes illustrative shares issued from stock-based compensation at average illustrative future share price
2. 2024E EBITDA adjusted for pro forma impact of WA divestiture per Condor Management; NPV of WA proceeds and interim cash flows treated as cash-like item in 2023E enterprise value to equity value bridge
3. 2024E – 2027E enterprise value to equity value bridge per Standalone LRP |
| PRELIMINARY DRAFT
Illustrative Seagull perspective assessment1
Illustrative close date of 12/31/2024; exit at 12/31/28
18
3 Updated valuation perspectives
Target Share price at LTM exit multiple of
IRR 6.0x 7.0x 8.0x 9.0x 10.0x
15.0% $3.47 $6.88 $10.29 $13.70 $17.11
16.3% 3.24 6.50 9.77 13.04 16.30
17.5% 3.02 6.15 9.28 12.41 15.54
18.8% 2.81 5.81 8.81 11.81 14.81
20.0% 2.61 5.49 8.37 11.24 14.12
Sources and uses $m % of total
Rollover of debt $2,292 67%
Cash on balance sheet 10 0%
Rollover of preferred equity 569 17%
Rollover of common equity 157 5%
New sponsor equity 375 11%
Total sources $3,404 100%
Memo: Incremental equity funding during ownership $224
Equity purchase price ($4.00 / share) 475 14%
Rollover of gross debt 2,292 67%
Rollover of preferred equity 569 17%
Transaction & financing fees 18 1%
Cash to balance sheet 50 1%
Total uses $3,404 100%
Sources: Illustrative Buyer Plan (No Pre-Closing Capital), Illustrative R&Co financing extrapolations
Notes:
1. Based on Illustrative Buyer Plan (No Pre-Closing Capital)
2. Based on liquidation preference of preferred as of 12/31/2024E
3. Transaction fees include illustrative estimated M&A fees and commitment fee on revolver
4. Illustratively assumes preferred equity remains in place during investment period with a 9% semi-annual PIK coupon; Illustrative proceeds allocable to initial investment calculated as implied
accreted liquidation value of preferred equity at exit plus implied proceeds to existing Seagull
common equity stake; illustrative proceeds allocable to new Seagull & Blue Jay equity deployed
calculated as implied total exit proceeds less proceeds allocated to initial investment
Acquisition by Seagull with portable capital structure and no change of control
given existing equity stake in business
Overview Seagull ability to pay4
Illustrative IRR on Seagull investments4
Represents implied IRR on Seagull’s initial common and preferred equity
investments of $350m and $75m in 2020 and 2021, respectively
2
2
Represents return on new Seagull
& Blue Jay equity deployed only
3
Implied IRR at entry share price of
$4.00 $5.00 $6.00 $7.00 $8.00 $9.00
6.0x 14.4% 12% 8% 5% 2% (0%) (3%)
7.0x 16.9% 27% 22% 18% 15% 12% 9%
8.0x 19.0% 38% 32% 28% 24% 21% 18%
9.0x 20.9% 46% 41% 36% 32% 29% 26%
10.0x 22.7% 54% 48% 43% 39% 35% 32%
Exit
multiple
IRR on
initial inv. |
| PRELIMINARY DRAFT
Illustrative Seagull ability to pay: sensitivity analysis1
Illustrative close date of 12/31/2024; exit at 12/31/28
19
3 Updated valuation perspectives
Sources: Illustrative Buyer Plan (No Pre-Closing Capital), Illustrative R&Co financing extrapolations
Notes:
1. Sensitivity analyses vs. Illustrative Buyer Plan (No Pre-Closing Capital)
2. All-in IRR denotes blended IRR across illustrative 2024E equity contribution plus Seagull’s initial common and preferred equity investments of $350m and $75m in 2020 and 2021, respectively
3. Illustratively assumes preferred equity remains in place during investment period with a 9% semi-annual PIK coupon
Seagull ability to pay sensitivity: 2028E EBITDA vs. exit multiple at varying all-in target IRRs2,3
15.0% IRR 17.5% IRR 20.0% IRR
Share price at Illustrative exit multiple of Share price at Illustrative exit multiple of Share price at Illustrative exit multiple of
6.0x 7.0x 8.0x 9.0x 10.0x 6.0x 7.0x 8.0x 9.0x 10.0x 6.0x 7.0x 8.0x 9.0x 10.0x
$550 37.3% n.m. n.m. $0.56 $4.47 $8.39 n.m. n.m. n.m. $2.22 $5.81 n.m. n.m. n.m. $0.05 $3.35
600 40.6% n.m. 0.15 4.42 8.69 12.96 n.m. n.m. 2.20 6.12 10.04 n.m. n.m. 0.06 3.67 7.27
650 44.0% n.m. 3.55 8.17 12.80 17.43 n.m. 1.42 5.67 9.91 14.16 n.m. n.m. 3.27 7.17 11.07
700 47.4% 1.93 6.91 11.89 16.88 21.86 n.m. 4.53 9.10 13.67 18.24 n.m. 2.24 6.44 10.65 14.85
719 48.7% 3.10 8.22 13.34 18.46 23.58 1.03 5.73 10.43 15.13 19.83 n.m. 3.35 7.67 11.99 16.31
750 50.8% 4.93 10.27 15.61 20.94 26.28 2.72 7.62 12.52 17.42 22.32 0.60 5.10 9.60 14.10 18.61
Illustrative
2028E
Adj. EBITDA
Implied
2028E
margin
Represents 2028E EBITDA per Illustrative Buyer Plan (No Pre-Closing Capital) |
| PRELIMINARY DRAFT
Analysis at various prices
Seagull verbal indication implies 9.6x, 8.5x and 6.9x 23E, 24E and 25E Adj. EBITDA, respectively
20
3 Updated valuation perspectives
Illustrative share price $2.76 $3.84 $4.00 $4.20 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50
Implied premia to:
Unaffected (Apr. 12, 2023) $2.76 – 39.1% 44.9% 52.2% 63.0% 81.2% 99.3% 117.4% 135.5% 153.6% 171.7%
Current (Sep. 1, 2023) $3.84 (28.1%) – 4.2% 9.4% 17.2% 30.2% 43.2% 56.3% 69.3% 82.3% 95.3%
1-month VWAP $2.49 10.9% 54.2% 60.7% 68.7% 80.8% 100.8% 120.9% 141.0% 161.1% 181.2% 201.3%
2-month VWAP $2.86 (3.5%) 34.2% 39.8% 46.8% 57.3% 74.8% 92.3% 109.7% 127.2% 144.7% 162.2%
3-month VWAP $3.07 (10.1%) 25.1% 30.3% 36.8% 46.6% 62.8% 79.1% 95.4% 111.7% 128.0% 144.3%
6-month VWAP $3.54 (22.1%) 8.4% 12.9% 18.5% 27.0% 41.1% 55.2% 69.3% 83.4% 97.5% 111.6%
52-week high (Sep. 12, 2022) $5.97 (53.8%) (35.7%) (33.0%) (29.6%) (24.6%) (16.2%) (7.9%) 0.5% 8.9% 17.3% 25.6%
52-week low (Mar. 24, 2023) $2.15 28.4% 78.6% 86.0% 95.3% 109.3% 132.6% 155.8% 179.1% 202.3% 225.6% 248.8%
(×) Fully diluted shares outstanding 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7
Implied equity value $328 $456 $475 $498 $534 $593 $653 $712 $771 $831 $890
(+) Net debt 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989
(-) NPV of WA assets (68) (68) (68) (68) (68) (68) (68) (68) (68) (68) (68)
(+) Preferred stock (at liquidation pref.) 498 498 498 498 498 498 498 498 498 498 498
(+) Other adjustments 93 93 93 93 93 93 93 93 93 93 93
Implied enterprise value $2,841 $2,969 $2,988 $3,012 $3,047 $3,107 $3,166 $3,225 $3,285 $3,344 $3,403
Memo: implied EV premium – 4.5% 5.2% 6.0% 7.3% 9.4% 11.4% 13.5% 15.6% 17.7% 19.8%
Implied multiples
EV / Revenue
2022PF $1,124 2.53x 2.64x 2.66x 2.68x 2.71x 2.76x 2.82x 2.87x 2.92x 2.97x 3.03x
LTM Jun-23PF 1,104 2.57 2.69 2.71 2.73 2.76 2.81 2.87 2.92 2.97 3.03 3.08
2023E (pro forma) 1,095 2.59 2.71 2.73 2.75 2.78 2.84 2.89 2.94 3.00 3.05 3.11
2024E (pro forma) 1,119 2.54 2.65 2.67 2.69 2.72 2.78 2.83 2.88 2.94 2.99 3.04
2025E 1,185 2.40 2.50 2.52 2.54 2.57 2.62 2.67 2.72 2.77 2.82 2.87
EV / Adj. EBITDA
2022PF $354 8.0x 8.4x 8.4x 8.5x 8.6x 8.8x 8.9x 9.1x 9.3x 9.4x 9.6x
LTM Jun-23PF 319 8.9 9.3 9.4 9.4 9.6 9.7 9.9 10.1 10.3 10.5 10.7
2023E (pro forma) 313 9.1 9.5 9.5 9.6 9.7 9.9 10.1 10.3 10.5 10.7 10.9
2024E (pro forma) 354 8.0 8.4 8.4 8.5 8.6 8.8 8.9 9.1 9.3 9.5 9.6
2025E 436 6.5 6.8 6.9 6.9 7.0 7.1 7.3 7.4 7.5 7.7 7.8
Sources: Company filings, FactSet (as of September 1, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Calendar day VWAPs; as of April 12, 2023
2. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
3. NPV of WA proceeds and interim cash flows treated as cash-like item; 2022 – 2024 financials adjusted for pro forma impact of WA divestiture per Condor Management
4. Other adjustments include net, tax-effected PBO and OPEB, NCI and Investments (net tax-effected PBO and OPEB provided per Condor Management, NCI and Investments sourced from Company filings)
5. Projected metrics per Standalone LRP; historical metrics per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
Unaffected
Seagull
Current proposal
2
3
5
2
1
1
1
1
4
3
3
3
3
3
3
3
3
Verbal
indication |
| Appendix
Appendix
A
21 |
| PRELIMINARY DRAFT
Washington NPV and pro forma impact analysis
Illustrative transaction close date of 6/30/2024
22
A Appendix
Sources: Condor Management, company filings, Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Historical results based on actual results; projected earnings and cash flows as approved by Condor Management
2. Assumes no cash taxes paid related to earnings and cash proceeds
$m, fiscal quarter ending Mar-22A Jun-22A Sep-22A Dec-22A Mar-23A Jun-23A Sep-23E Dec-23E Mar-24E Jun-24E Sale
Sales $5.2 $5.3 $5.2 $5.1 $5.0 $5.1 $5.0 $5.0 $4.8 $4.6
Adj. EBITDA $3.6 $3.7 $3.7 $3.6 $3.5 $3.5 $3.4 $3.4 $3.2 $3.0
(-) Capital expenditures (1.0) (0.9) (1.0) (1.0)
(+) Net proceeds from divestiture 65.0
Unlevered free cash flow $2.4 $2.4 $2.2 $2.0 $65.0
NPV of WA assets at 10.0% WACC 68
Historical and projected Washington cash flows1,2 |
| PRELIMINARY DRAFT
Selected public company analysis: valuation benchmarking
23
A Appendix
Share %52w Market Enterprise EV / Sales EV / EBITDA Sales Growth
$m, unless noted price ($) high cap value 2023E 2024E 2025E 2023E 2024E 2025E
Condor (Standalone LRP) $2.76 33% $328 $2,841 2.59x 2.54x 2.40x 9.1x 8.0x 6.5x
Condor (Consensus) $2.76 33% $328 $2,841 2.57x 2.55x 2.47x 9.2x 8.4x 7.8x
ILEC
Lumen $1.58 16% $1,636 $22,655 1.55x 1.62x 1.64x 4.8x 5.0x 5.0x
Frontier $16.31 53% 4,123 13,537 2.35x 2.33x 2.26x 6.5x 6.3x 5.8x
Mean / median 1.95x 1.98x 1.95x 5.6x 5.6x 5.4x
Rural cable
Cable One $628.02 56% $3,589 $6,026 3.57x 3.58x 3.52x 6.5x 6.4x 6.3x
Shentel $22.55 98% 1,159 1,232 4.31x 3.90x 3.52x 14.4x 13.2x 8.9x
Mean / median 3.94x 3.74x 3.52x 10.5x 9.8x 7.6x
Cable
Charter $422.32 94% $72,044 $168,171 3.06x 2.99x 2.94x 7.6x 7.3x 7.1x
Altice $3.06 29% 1,467 26,428 2.87x 2.93x 2.99x 7.4x 7.4x 7.4x
WOW $8.01 42% 676 1,530 2.20x 2.18x 2.16x 5.3x 5.0x 4.5x
Mean 2.71x 2.70x 2.70x 6.8x 6.6x 6.3x
Median 2.87x 2.93x 2.94x 7.4x 7.3x 7.1x
Broadband
ATN International $36.12 73% $577 $1,109 1.46x 1.41x 1.36x 6.0x 5.5x 5.1x
Overall peer mean 2.67x 2.62x 2.55x 7.3x 7.0x 6.2x
Overall peer median 2.61x 2.63x 2.60x 6.5x 6.3x 6.0x
Sources: company filings, FactSet (as of September 1, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Condor share price as of April 12, 2023; all other companies as of September 1, 2023
2. Condor 52-week high as of April 12, 2023; all other companies as of September 1, 2023
3. Valuation date as of June 30, 2023 as per Condor Management; Condor Management-provided FDSO of 118.7m as of July 31, 2023
4. NPV of WA proceeds and interim cash flows treated as cash-like item ($68m; see p. 22)
5. Metrics based on Standalone LRP; 2023 – 2024 financials adjusted for pro forma impact of WA divestiture per Condor Management
6. Metrics based on median consensus estimates
7. Lumen capitalization pro forma for divestiture of EMEA Business
3,4,5
1
3,4,6
6
2 |
| PRELIMINARY DRAFT
Illustrative discounted cash flow analysis
24
A Appendix
Projected cash flows1
$m H2-2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Total revenue $564 $1,128 $1,185 $1,264 $1,316 $1,382 $1,443 $1,505 $1,547 $1,547
% growth n.m. 5.1% 6.6% 4.1% 5.0% 4.5% 4.3% 2.8%
Adj. EBITDA 175 360 436 526 601 657 699 751 781 781
% margin 30.9% 31.9% 36.8% 41.6% 45.7% 47.6% 48.4% 49.9% 50.5%
(-) One-time items -- (15) (13) (15) (15) (15) (15) (15) (15) (15)
(-) D&A (241) (328) (241) (206) (187) (227) (265) (283) (276) (201)
(+) Gain on asset divestitures -- 60 -- -- -- -- -- -- -- --
EBIT (66) 77 181 305 399 415 419 453 489 564
(-) Tax at 26% marginal rate -- (20) (47) (79) (104) (108) (109) (118) (127) (147)
NOPAT (66) 57 134 226 296 307 310 335 362 418
(+) D&A 241 328 241 206 187 227 265 283 276 201
(-) CapEx (186) (359) (285) (274) (319) (318) (334) (231) (220) (201)
(+) Untaxed proceeds from asset divestitures -- 5 -- -- -- -- -- -- -- --
(-) Stock-based compensation (5) (10) (10) (10) (10) (10) (10) (10) (10) (10)
(+/-) Source / (use) of NWC (85) 7 (2) (6) 4 11 (4) (15) (3) (3)
Unlevered FCF ($101) $28 $79 $142 $157 $217 $227 $361 $405 $405
Terminal
period Enterprise value ($m) PV of terminal value as % of EV Implied share price Implied terminal multiple
at PGR of at PGR of at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $3,354 $3,440 $3,533 $3,631 $3,737 74% 75% 75% 76% 77% $6.51 $7.24 $8.02 $8.85 $9.74 6.6x 6.8x 7.1x 7.3x 7.6x
9.75% 3,223 3,303 3,388 3,479 3,576 73% 74% 75% 75% 76% 5.41 6.08 6.80 7.57 8.38 6.4x 6.6x 6.8x 7.1x 7.3x
10.00% 3,100 3,174 3,253 3,337 3,426 73% 73% 74% 75% 75% 4.37 5.00 5.66 6.37 7.12 6.2x 6.4x 6.6x 6.8x 7.1x
10.25% 2,985 3,053 3,126 3,204 3,286 72% 73% 73% 74% 75% 3.40 3.98 4.60 5.25 5.94 6.0x 6.2x 6.4x 6.6x 6.9x
10.50% 2,876 2,940 3,007 3,079 3,155 71% 72% 73% 73% 74% 2.49 3.02 3.59 4.20 4.84 5.9x 6.0x 6.2x 6.4x 6.6x
Sources: Standalone LRP, company filings, Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Projected unlevered cash flows per Standalone LRP
2. Terminal period assumptions per Condor Management and approved by the Special Committee;
D&A assumed equal to CapEx per Condor Management
3. Per Condor Management, one-time items are tax deductible; stock-based compensation not tax deductible
2
6 7
4. 26% tax rate as per Condor Management
5. 50% of full year 2023E D&A per Condor Management and approved by the
Special Committee
6. Valuation date as of June 30, 2023
7. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
5
4
3
6
3 |
| PRELIMINARY DRAFT
Illustrative NOL valuation analysis
25
A Appendix
$m H2-2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Memo: Taxable income $52 $114 $196 $266 $278 $280 $304 $329
Restricted federal NOLs utilized 52 89 -- -- -- -- -- --
Unrestricted federal NOLs utilized -- 20 157 171 -- -- -- --
Total federal NOLs used 52 109 157 171 -- -- -- --
(x) Tax rate 21% 21% 21% 21% 21% 21% 21% 21%
FV of federal NOL benefit 11 23 33 36 -- -- -- --
Projected NOL utilization1,2
3
4
6
1. Projected federal NOL generation and utilization per Standalone LRP
2. Valuation date as of June 30, 2023
3. Restricted federal NOLs generated prior to 2018
4. Unrestricted federal NOLs generated during or after 2018; subject to 80% of taxable income limitation
Sources: Standalone LRP, company filings, Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
5. 21% federal tax rate as per Condor Management
6. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
5
Discount Cumulative Incr. value
rate PV per share
9.50% $79.0 $0.67
9.75% 78.5 0.66
10.00% 78.0 0.66
10.25% 77.5 0.65
10.50% 77.0 0.65 |
| PRELIMINARY DRAFT
Weighted average cost of capital (WACC)
26
A Appendix
Market Debt Pref. Debt / Debt / Tax Beta
Peer cap ($m) ($m) eq. ($m) equity cap rate (%) Levered Unlevered Re-levered
Frontier $4,123 $11,424 – 277% 73% 25% 1.13 0.37 0.66
Cable One 3,589 3,790 – 106% 51% 25% 1.02 0.57 1.02
Shentel 1,159 127 – 11% 10% 25% 0.97 0.90 1.61
WOW 676 877 – 130% 56% 25% 1.03 0.52 0.94
ATN International 577 539 – 94% 48% 25% 0.70 0.41 0.73
75th percentile 56% 1.03 0.57
Mean 48% 0.97 0.55
Median 106% 51% 1.02 0.52
25th percentile 48% 0.97 0.41
Condor $328 $2,192 $498 821% 89% 26% 1.06 0.15 0.27
Cost of equity
Risk-free rate 4.5%
Levered beta 0.93
Equity risk premium 6.8%
Size premium 2.2%
Cost of equity 12.9%
Cost of debt
Cost of debt (pre-tax) 9.9%
Tax shield (2.6%)
Selected public company beta analysis Cost of debt (post-tax) 7.4%
Implied WACC
Based on CAPM analysis and
historical trading yields,
estimated WACC range for
Condor is 9.5 - 10.5%
1
2
3
3
4
5
6
7
8
9 10 10 8
1. Based on median gross debt to capital ratio of peer references
2. Based on peer median 2-year adjusted historical beta (weekly periodicity, regressed against S&P 500) per
Bloomberg (as of September 1, 2023)
3. Unlevered beta = Bloomberg adjusted beta ÷ ( 1+ ( 1 – marginal tax rate) × D/E )
4. Based on current yield on 20-year US Treasury (as of September 1, 2023)
5. Based on the average of Kroll’s Supply-side ERP methodology (6.4%) and Historical ERP methodology
(7.2%) per Kroll’s Cost of Capital Guide (as of December 31, 2022)
6. Based on Kroll’s size premia analysis per Kroll’s Cost of Capital Guide (9th decile, as of December 31, 2022)
Sources: company filings, FactSet (as of September 1, 2023 and April 12, 2023), Bloomberg (as of September 1, 2023 and April 12, 2023), US Federal Reserve, Kroll Cost of Capital Guide, Pitchbook LCD Research
Notes:
7. Average of Single-B new-issue first-lien yield to maturity (Pitchbook LCD
Research) and Single-B US High Yield Index Semi-Annual Yield to Worst (FRED)
8. 26% tax rate as per Condor Management
9. Condor beta and share price as of April 12, 2023; Valuation date as of June 30,
2023 as per Condor Management; Condor Management-provided FDSO of
118.7m as of July 31, 2023
10. Illustratively includes preferred equity as debt-like item
Implied levered beta Implied cost of equity Implied WACC
Gross Gross Pre-tax cost at unlevered beta of at unlevered beta of at unlevered beta of
debt / cap debt / equity of debt 0.40 0.52 0.60 0.40 0.52 0.60 0.40 0.52 0.60
25.0% 33.3% 9.9% 0.50 0.65 0.75 10.0% 11.0% 11.7% 9.3% 10.1% 10.6%
35.0% 53.8% 9.9% 0.56 0.73 0.84 10.4% 11.6% 12.3% 9.3% 10.1% 10.6%
51.4% 105.6% 9.9% 0.71 0.93 1.07 11.4% 12.9% 13.9% 9.3% 10.1% 10.5%
55.0% 122.2% 9.9% 0.76 1.00 1.14 11.8% 13.4% 14.4% 9.3% 10.1% 10.5%
65.0% 185.7% 9.9% 0.95 1.24 1.42 13.1% 15.0% 16.3% 9.4% 10.0% 10.5% |
| PRELIMINARY DRAFT
Analyst price targets
27
A Appendix
$4.50
$2.50
$4.00
$4.00
$3.75
$4.00
Analyst sentiment over time1 Analyst price targets2
Number of broker recommendations
4 4 4 4 4
Target price as of Unaffected date
Current price target
Average target price over time1
$ actual Sep-21 Mar-22 Sep-22 Mar-23 Sep-23
Average target price $8.00 $5.50 $6.17 $3.67 $3.92
% Premium (12.9%) (6.8%) 48.2% 52.1% 2.0%
Memo: $3.94 based on DCF
Memo: Scenario weighted; 75% based on $4.00 Seagull proposal
and 25% based on average of $4.72 DCF valuation and
$1.58 2023 EV / OIBDA valuation (9.5x)
Memo: $4.00 based on DCF
–
$2.00
$4.00
$6.00
$8.00
$10.00
-
20%
40%
60%
80%
100%
Sep-21 Mar-22 Sep-22 Mar-23 Sep-23
% of ratings
Buy Hold Sell Share price Target price
Sources: FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023)
Notes:
1. Target prices based on 100-day FactSet consensus window
2. Selection excludes SADIF Investment Analytics |
| PRELIMINARY DRAFT
CAGR
$m, unless noted 2020PF 2021PF 2022PF 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E (23-27) (27-31)
Residential fiber $127 $199 $297 $418 $519 $614 $668 $706 $732 42% 9 %
Resi copper, video, voice 324 290 261 240 214 197 180 165 151 (10%) (8%)
SMB 9 1 8 7 8 5 8 6 8 9 9 1 9 4 9 6 9 8 (1%) 2 %
Enterprise1 295 293 296 306 319 332 343 354 364 2 % 3 %
Carrier2 146 136 139 141 143 144 146 147 149 (0%) 1 %
Other3
133 123 114 108 103 9 8 9 4 9 0 8 6 (6%) (4%)
Revenue $1,238 $1,222 $1,145 $1,115 $1,128 $1,193 $1,300 $1,388 $1,476 $1,524 $1,558 $1,580 6 % 3 %
% growth n.a. (1%) (6%) (3%) 1 % 6 % 9 % 7 % 6 % 3 % 2 % 1 %
Gross profit $1,090 $1,066 $997 $880 $904 $984 $1,090 $1,184 $1,263 $1,305 $1,334 $1,354 8 % 3 %
% margin 88% 87% 87% 79% 80% 83% 84% 85% 86% 86% 86% 86%
Adj. EBITDA4 $462 $442 $369 $327 $360 $423 $534 $635 $719 $750 $772 $783 18% 5 %
% margin 37% 36% 32% 29% 32% 35% 41% 46% 49% 49% 50% 50%
Unlevered free cash flow5 $23 ($35) $40 $160 $342 $378 $402 $419 n.a. 27%
% margin 2 % (3%) 3% 12% 23% 25% 26% 26%
Memo:
CapEx ($495) ($370) ($409) ($394) ($340) ($230) ($221) ($214) ($205) (9%) (12%)
CapEx % of revenue 44% 33% 34% 30% 25% 16% 14% 14% 13%
Change in working capital (17) 1 1 5 (7) (7) (6) (3) (2) (2) (19%) (32%)
EBITDA - CapEx ($168) ($10) $14 $140 $295 $490 $529 $558 $578 n.a. 18%
% conversion (51%) (3%) 3% 26% 46% 68% 71% 72% 74%
Cost / passing (pre-CWIP & inventory) $639 $849 $942 $830 $952 n.a. n.a. n.a. n.a. 10% n.a.
Summary of Illustrative Buyer Plan (No Pre-Closing Capital)
28
A Appendix
Notes: Financials as presented include WA results until transaction close in 2024
1. Enterprise revenue includes other commercial revenue (non-recurring and other services including
business systems, joint pole & special projects, commercial video services and other services)
2. Carrier revenue includes other carrier revenue (non-recurring and other services including business
systems, joint pole & special projects, commercial video services and other services)
3. Other revenue includes other subsidy revenue (excluding CAF), CAF / RDOF subsidy revenue, special
access revenue, network / switched access revenue, USF revenue and other products / services rev.
4. Adj. EBITDA excludes cost of stock-based compensation (“SBC”)
5. Unlevered free cash flow per Standalone LRP; calculated as EBIT – taxes + tax depreciation – CapEx
+ / - change in NWC + net proceeds from asset divestitures; does not consider generated nor utilized
NOLs; negative EBIT results in $0 tax paid; contemplating H2-2023 unlevered free cash flow for
purposes of valuation
Sources: Illustrative Buyer Plan (No Pre-Closing Capital), pro forma historical periods (2020-2022) provided by Condor Management (normalized to exclude divestures of Ohio and Kansas City operations and wireless
partnerships) |
| PRELIMINARY DRAFT
Summary of Illustrative Buyer Plan (No Pre-Closing Capital)
(cont’d)
29
A Appendix
Select cash flow and leverage metrics
Source: Illustrative Buyer Plan (No Pre-Closing Capital)
Notes: Financials as presented include WA results until transaction close in 2024
1. Adj. EBITDA excludes cost of SBC
2. Defined as respective metric ÷ Adj. EBITDA
3. Levered free cash flow per Standalone LRP; calculated as Adj. EBITDA – cash taxes (net of NOLs) – CapEx
+ / - change in NWC – cash interest – finance lease payments – pension / OPEB contributions – one-time items;
does not reflect movements in revolver or net proceeds from asset divestitures
4. Leverage defined as net debt ÷ Adj. EBITDA; does not contemplate additional potential add-backs allowed by debt covenants
5. Net debt excludes deferred debt issuance costs
6. Total liquidity based on cash on hand and revolver availability
CAGR
$ m 2023E 2024E 2025E 2026E 2027E (23-27)
Adj. EBITDA1
$327 $360 $423 $534 $635 18%
% margin 29% 32% 35% 41% 46%
Build (177) (77) (148) (149) (112) (11%)
Success-based (190) (184) (182) (172) (159) (4%)
Maintenance capex (128) (109) (79) (73) (69) (14%)
CapEx ($495) ($370) ($409) ($394) ($340) (9%)
CapEx % of sales 44% 33% 34% 30% 25%
Adj. EBITDA1
- CapEx ($168) ($10) $14 $140 $295 n.a.
% conversion 2
(51%) (3%) 3 % 26% 46%
Levered free cash flow3
($409) ($212) ($203) ($89) $77 n.a.
% conversion 2
(125%) (59%) (48%) (17%) 12%
Leverage4,5 6.6x 6.4x 5.9x 4.8x 3.9x n.a.
Memo: Net debt5
2,159 2,300 2,484 2,569 2,495 n.a.
Liquidity6
$231 $85 ($118) ($207) ($146) n.a. |
Exhibit (c)(vi)
| PRELIMINARY DRAFT
Project Seashore
Special Committee materials
September 13th, 2023
1 |
| PRELIMINARY DRAFT
Disclaimer
The accompanying materials were compiled on a confidential basis by Rothschild & Co US Inc. (“Rothschild & Co”) for the use and benefit of the Special Committee (the “Special
Committee”) of the Board of Directors of Consolidated Communications Holdings, Inc. (the “Company” or “Condor”) solely in connection with its evaluation of the transaction referred to
herein.
Neither Rothschild & Co nor any of its affiliates, nor any of its or their respective officers, directors, employees, advisors, agents or representatives, represents or warrants as to the accuracy
or completeness of any of the materials set forth herein. Nothing contained in the accompanying materials is, or shall be relied upon as, a promise or representation as to the past, present
or future.
It should be understood that these materials, including any valuations and/or estimates or projections contained in the accompanying materials, were prepared or derived from information
supplied by the Company or derived from public sources, without any independent verification by Rothschild & Co. This information, including any valuations, estimates or projections,
involves numerous and significant assumptions and subjective determinations by the Company’s management and other sources, which may or may not be correct, although the Company
has represented that the materials are reasonably based. Rothschild & Co assumes no responsibility for independent verification of such information and has relied on such information
being complete and accurate in all material respects. Accordingly, no representation or warranty, express or implied, can be made or is made by Rothschild & Co as to the accuracy or
completeness of any such information or the achievability of any such valuations and/or estimates or projections. To the extent such information includes any estimates or projections of
future financial performance, Rothschild & Co has assumed that such estimates or projections have been reasonably prepared on bases reflecting the best currently available estimates and
judgments of management of the Company (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). The accompanying material does
not represent an opinion as to the prices at which the Company, or any interests therein, actually would be acquired or sold.
Except where otherwise indicated, this presentation speaks as of the date hereof and is necessarily based upon the information available to Rothschild & Co and financial, stock market and
other conditions and circumstances existing and disclosed to Rothschild & Co as of the date hereof. Rothschild & Co does not have any obligation to update, review or reaffirm these
materials. The presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Rothschild & Co. Under no circumstances
should the delivery of this presentation imply that any information or analyses included in this presentation would be the same if made as of any other date.
These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. No single
analysis contained herein can be deemed more or less important than any other analysis and these analyses must be considered, in their totality, with the oral briefing provided by
Rothschild & Co. Prior to entering into any transaction, the Special Committee should determine, without reliance on Rothschild & Co or its affiliates, the economic risks and merits as well
as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting these materials, the Special Committee acknowledges that
Rothschild & Co is not in the business of providing (and the Special Committee is not relying on Rothschild & Co for) legal, tax or accounting advice, and the Special Committee should
receive (and rely on) separate and qualified legal, tax and accounting advice. These materials do not constitute an offer or solicitation to sell or purchase any securities.
Rothschild & Co is not acting in any capacity as a fiduciary or agent of the Special Committee, the Board of Directors or the Company.
In the ordinary course of their asset management, merchant banking and other business activities, affiliates of Rothschild & Co may at any time hold long or short positions, and may trade
or otherwise effect transactions, for their own accounts or the accounts of their clients in equity, debt or other securities (or related derivative securities) or financial instruments of the
Company or any of its affiliates or any other company that may be involved in a transaction.
THIS PRESENTATION IS CONFIDENTIAL AND WAS NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR FILING THEREOF UNDER STATE OR FEDERAL SECURITIES
LAWS OR OTHERWISE. THIS PRESENTATION MAY NOT BE COPIED BY, OR DISCLOSED OR MADE AVAILABLE TO, ANY PERSON WITHOUT THE PRIOR WRITTEN APPROVAL
OF Rothschild & Co.
THIS PRESENTATION IS NOT INTENDED TO BE USED OR RELIED UPON, AND SHOULD NOT BE USED OR RELIED UPON, BY ANY PERSON OTHER THAN THE SPECIAL
COMMITTEE AND MAY NOT BE USED BY ANY OTHER PERSON WITHOUT PRIOR WRITTEN APPROVAL OF Rothschild & Co.
2 |
| PRELIMINARY DRAFT
Preliminary assessment of valuation methodologies
3
3. Financials through 2024E adjusted for pro forma impact of WA divestiture per Condor Management
4. NPV of WA proceeds and interim cash flows treated as cash-like item for purposes of EV bridge ($68m; see p. 22)
5. NOL schedule based on Standalone LRP
6. Current analyst target prices based, in part, on take-out price; intrinsic represents DCF-based analysis;
Selection excludes SADIF Investment Analytics
Notes:
1. Rounded to neared $0.25 except for 52-week high / low and analyst target prices
2. Per Condor Management, assumes 118.7m fully diluted shares outstanding, net debt
of $1.99bn, net, tax-effected PBO and OPEB of $94.5m, NCI of $8.0m,
Investments of $9.1m and preferred equity valued at liquidation preference of $498.3m
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Methodology Per-share value ($ actual)1,2 Implied EV ($bn)2 Assumptions
Core methodologies
Selected
public company
analysis
EV / 2024E
Revenue3
$2.5 – 3.14
◼ EV / 2024E Revenue: 2.25x – 2.75x
EV / 2024E
Adj. EBITDA3
$1.9 – 2.54
◼ EV / 2024E Adj. EBITDA multiple: 5.5x – 7.0x
EV / 2025E
Adj. EBITDA $2.4 – 3.04
◼ EV / 2025E Adj. EBITDA multiple: 5.5x – 7.0x
Selected precedent
transactions
EV / LTM Q2’23
Adj. EBITDA3
$1.9 – 3.04
◼ EV / LTM Adj. EBITDA: 6.0x – 9.4x
Illustrative discounted
cash flow analysis $2.9 – 3.7
◼ PGR: 1.5 – 2.5%
◼ WACC: 9.5 – 10.5%
◼ Valuation date as of 6/30/2023
Other references
Premia paid
analysis
All-cash
going private
transactions
$3.0 – 3.14 ◼ 35 – 80% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
All-cash
acquisitions $2.9 – 3.04 ◼ 21 – 53% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
Other
metrics
52-week
high / low $2.8 – 3.24 ◼ 52-week trading high and low closing prices
as of September 1, 2023
Analyst target
prices
Unaffected
$2.8 – 3.04 ◼ Represents low and high of analyst target prices
as of April 12, 20236
Analyst target
prices
Current
$3.0 – 3.04 ◼ Represents low and high of analyst target prices
as of September 1, 20236
Analyst target
prices
Intrinsic
$3.0 – 3.14 ◼ Represents low and high of analyst DCF-based
valuations as of September 1, 20236
n.m.
n.m.
n.m.
n.m.
2.50
3.75
3.25
2.15
2.50
3.75
3.94
4.75
4.50
4.00
9.75
5.00
4.25
5.97
4.50
4.00
4.72
Seagull proposal: $4.00
April 12th closing price: $2.76
3.25
Incl. NOL value5
3.92
Current trading implies 8.4x
’24E EBITDA
10.50
1
st Seagull verbal indication: $4.20
7.1x multiple
implies $0 of
equity value
2
nd Seagull verbal indication: $4.35 |
| PRELIMINARY DRAFT
DCF sensitivity to varying operating assumptions
Does not contemplate illustrative impacts to liquidity and NOL usage
4
3.73
n.m.
5.07
3.04
4.70
1.01
4.53
7.30
7.48
6.08
7.50
6.63
6.12
7.40
Implied per-share DCF midpoint range Base assumption 1,2,3 Item
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Sensitivity analyses vs. Standalone LRP
2. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
3. Assumes WACC of 10.0% and PGR of 2.0%
Enterprise sales
growth rate
◼ Enterprise sales decline ~1% in
2023E and grow at a CAGR of
~3.1% from 2024 – 2031E
~3.1%
0% 5%
~50.5%
45% 51% ◼ Adj. EBITDA margin reaches ~50.5%
by 2031E
Terminal
Adj. EBITDA
margin
Residential fiber
terminal
penetration
◼ Residential fiber cohorts reach 40%
penetration by year 6
Cost per home
passed
◼ Blended cost per home passed
increases from ~$850 in 2024 to
~$1,250 by 2027, dropping to ~$725
thereafter (pre-CWIP / Inventory)
Sensitivity range
35% 45%
40%
-$200
vs. base
+$200
vs. base
~$850 – ~1,250; ~$725
Non-video
COGS %
of sales
◼ COGS % of sales decline from
~15.1% in 2023E and stepped down
to 12.0% by 2027E;
held at 12.0% through 2031E
Terminal CapEx
% of sales
◼ “Steady-state” CapEx estimated at
13% of sales in terminal period 10%
13%
15%
Base DCF (ex. NOLs)
midpoint: $5.66
Residential fiber
ARPU growth rate
◼ Existing residential fiber subscriber
ARPU grown at 4.0% p.a.;
new cohort residential fiber
subscriber ARPU grown at 5.0% p.a
~15.0 – 12.0%
-100 bps
vs. base
+100 bps
vs. base
0%;1% 5%; 6%
4%; 5% |
| PRELIMINARY DRAFT
Illustrative share price $2.76 $3.84 $4.00 $4.20 $4.35 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50
Implied premia to:
Unaffected (Apr. 12, 2023) $2.76 – 39.1% 44.9% 52.2% 57.6% 63.0% 81.2% 99.3% 117.4% 135.5% 153.6% 171.7%
Current (Sep. 1, 2023) $3.84 (28.1%) – 4.2% 9.4% 13.3% 17.2% 30.2% 43.2% 56.3% 69.3% 82.3% 95.3%
1-month VWAP $2.49 10.9% 54.2% 60.7% 68.7% 74.7% 80.8% 100.8% 120.9% 141.0% 161.1% 181.2% 201.3%
2-month VWAP $2.86 (3.5%) 34.2% 39.8% 46.8% 52.1% 57.3% 74.8% 92.3% 109.7% 127.2% 144.7% 162.2%
3-month VWAP $3.07 (10.1%) 25.1% 30.3% 36.8% 41.7% 46.6% 62.8% 79.1% 95.4% 111.7% 128.0% 144.3%
6-month VWAP $3.54 (22.1%) 8.4% 12.9% 18.5% 22.7% 27.0% 41.1% 55.2% 69.3% 83.4% 97.5% 111.6%
52-week high (Sep. 12, 2022) $5.97 (53.8%) (35.7%) (33.0%) (29.6%) (27.1%) (24.6%) (16.2%) (7.9%) 0.5% 8.9% 17.3% 25.6%
52-week low (Mar. 24, 2023) $2.15 28.4% 78.6% 86.0% 95.3% 102.3% 109.3% 132.6% 155.8% 179.1% 202.3% 225.6% 248.8%
(×) Fully diluted shares outstanding 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7
Implied equity value $328 $456 $475 $498 $516 $534 $593 $653 $712 $771 $831 $890
(+) Net debt 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989
(-) NPV of WA assets (68) (68) (68) (68) (68) (68) (68) (68) (68) (68) (68) (68)
(+) Preferred stock (at liquidation pref.) 498 498 498 498 498 498 498 498 498 498 498 498
(+) Other adjustments 93 93 93 93 93 93 93 93 93 93 93 93
Implied enterprise value $2,841 $2,969 $2,988 $3,012 $3,029 $3,047 $3,107 $3,166 $3,225 $3,285 $3,344 $3,403
Memo: implied EV premium – 4.5% 5.2% 6.0% 6.6% 7.3% 9.4% 11.4% 13.5% 15.6% 17.7% 19.8%
Implied multiples
EV / Revenue
2022PF $1,124 2.53x 2.64x 2.66x 2.68x 2.69x 2.71x 2.76x 2.82x 2.87x 2.92x 2.97x 3.03x
LTM Jun-23PF 1,104 2.57 2.69 2.71 2.73 2.74 2.76 2.81 2.87 2.92 2.97 3.03 3.08
2023E (pro forma) 1,095 2.59 2.71 2.73 2.75 2.77 2.78 2.84 2.89 2.94 3.00 3.05 3.11
2024E (pro forma) 1,119 2.54 2.65 2.67 2.69 2.71 2.72 2.78 2.83 2.88 2.94 2.99 3.04
2025E 1,185 2.40 2.50 2.52 2.54 2.56 2.57 2.62 2.67 2.72 2.77 2.82 2.87
EV / Adj. EBITDA
2022PF $354 8.0x 8.4x 8.4x 8.5x 8.6x 8.6x 8.8x 8.9x 9.1x 9.3x 9.4x 9.6x
LTM Jun-23PF 319 8.9 9.3 9.4 9.4 9.5 9.6 9.7 9.9 10.1 10.3 10.5 10.7
2023E (pro forma) 313 9.1 9.5 9.5 9.6 9.7 9.7 9.9 10.1 10.3 10.5 10.7 10.9
2024E (pro forma) 354 8.0 8.4 8.4 8.5 8.6 8.6 8.8 8.9 9.1 9.3 9.5 9.6
2025E 436 6.5 6.8 6.9 6.9 7.0 7.0 7.1 7.3 7.4 7.5 7.7 7.8
Analysis at various prices
Seagull 2nd verbal indication implies 9.7x, 8.6x and 7.0x 23E, 24E and 25E Adj. EBITDA,
respectively
5
Sources: Company filings, FactSet (as of September 1, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Calendar day VWAPs; as of April 12, 2023
2. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
3. NPV of WA proceeds and interim cash flows treated as cash-like item; 2022 – 2024 financials adjusted for pro forma impact of WA divestiture per Condor Management
4. Other adjustments include net, tax-effected PBO and OPEB, NCI and Investments (net tax-effected PBO and OPEB provided per Condor Management, NCI and Investments sourced from Company filings)
5. Projected metrics per Standalone LRP; historical metrics per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
Unaffected
Seagull
Current proposal
2
3
5
2
1
1
1
1
4
3
3
3
3
3
3
3
3
1
st Verbal
indication
2
nd Verbal
indication |
Exhibit (c)(vii)
| PRELIMINARY DRAFT
Project Seashore
Special Committee materials
September 23rd, 2023
1 |
| PRELIMINARY DRAFT
Disclaimer
The accompanying materials were compiled on a confidential basis by Rothschild & Co US Inc. (“Rothschild & Co”) for the use and benefit of the Special Committee (the “Special
Committee”) of the Board of Directors of Consolidated Communications Holdings, Inc. (the “Company” or “Condor”) solely in connection with its evaluation of the transaction referred to
herein.
Neither Rothschild & Co nor any of its affiliates, nor any of its or their respective officers, directors, employees, advisors, agents or representatives, represents or warrants as to the accuracy
or completeness of any of the materials set forth herein. Nothing contained in the accompanying materials is, or shall be relied upon as, a promise or representation as to the past, present
or future.
It should be understood that these materials, including any valuations and/or estimates or projections contained in the accompanying materials, were prepared or derived from information
supplied by the Company or derived from public sources, without any independent verification by Rothschild & Co. This information, including any valuations, estimates or projections,
involves numerous and significant assumptions and subjective determinations by the Company’s management and other sources, which may or may not be correct, although the Company
has represented that the materials are reasonably based. Rothschild & Co assumes no responsibility for independent verification of such information and has relied on such information
being complete and accurate in all material respects. Accordingly, no representation or warranty, express or implied, can be made or is made by Rothschild & Co as to the accuracy or
completeness of any such information or the achievability of any such valuations and/or estimates or projections. To the extent such information includes any estimates or projections of
future financial performance, Rothschild & Co has assumed that such estimates or projections have been reasonably prepared on bases reflecting the best currently available estimates and
judgments of management of the Company (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). The accompanying material does
not represent an opinion as to the prices at which the Company, or any interests therein, actually would be acquired or sold.
Except where otherwise indicated, this presentation speaks as of the date hereof and is necessarily based upon the information available to Rothschild & Co and financial, stock market and
other conditions and circumstances existing and disclosed to Rothschild & Co as of the date hereof. Rothschild & Co does not have any obligation to update, review or reaffirm these
materials. The presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Rothschild & Co. Under no circumstances
should the delivery of this presentation imply that any information or analyses included in this presentation would be the same if made as of any other date.
These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. No single
analysis contained herein can be deemed more or less important than any other analysis and these analyses must be considered, in their totality, with the oral briefing provided by
Rothschild & Co. Prior to entering into any transaction, the Special Committee should determine, without reliance on Rothschild & Co or its affiliates, the economic risks and merits as well
as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting these materials, the Special Committee acknowledges that
Rothschild & Co is not in the business of providing (and the Special Committee is not relying on Rothschild & Co for) legal, tax or accounting advice, and the Special Committee should
receive (and rely on) separate and qualified legal, tax and accounting advice. These materials do not constitute an offer or solicitation to sell or purchase any securities.
Rothschild & Co is not acting in any capacity as a fiduciary or agent of the Special Committee, the Board of Directors or the Company.
In the ordinary course of their asset management, merchant banking and other business activities, affiliates of Rothschild & Co may at any time hold long or short positions, and may trade
or otherwise effect transactions, for their own accounts or the accounts of their clients in equity, debt or other securities (or related derivative securities) or financial instruments of the
Company or any of its affiliates or any other company that may be involved in a transaction.
THIS PRESENTATION IS CONFIDENTIAL AND WAS NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR FILING THEREOF UNDER STATE OR FEDERAL SECURITIES
LAWS OR OTHERWISE. THIS PRESENTATION MAY NOT BE COPIED BY, OR DISCLOSED OR MADE AVAILABLE TO, ANY PERSON WITHOUT THE PRIOR WRITTEN APPROVAL
OF Rothschild & Co.
THIS PRESENTATION IS NOT INTENDED TO BE USED OR RELIED UPON, AND SHOULD NOT BE USED OR RELIED UPON, BY ANY PERSON OTHER THAN THE SPECIAL
COMMITTEE AND MAY NOT BE USED BY ANY OTHER PERSON WITHOUT PRIOR WRITTEN APPROVAL OF Rothschild & Co.
2 |
| PRELIMINARY DRAFT
Preliminary assessment of valuation methodologies
3
3. Financials through 2024E adjusted for pro forma impact of WA divestiture per Condor Management
4. NPV of WA proceeds and interim cash flows treated as cash-like item for purposes of EV bridge ($68m; see p. 22)
5. NOL schedule based on Standalone LRP
6. Current analyst target prices based, in part, on take-out price; intrinsic represents DCF-based analysis;
Selection excludes SADIF Investment Analytics
Notes:
1. Rounded to neared $0.25 except for 52-week high / low and analyst target prices
2. Per Condor Management, assumes 118.7m fully diluted shares outstanding, net debt
of $1.99bn, net, tax-effected PBO and OPEB of $94.5m, NCI of $8.0m,
Investments of $9.1m and preferred equity valued at liquidation preference of $498.3m
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Methodology Per-share value ($ actual)1,2 Implied EV ($bn)2 Assumptions
Core methodologies
Selected
public company
analysis
EV / 2024E
Revenue3
$2.5 – 3.14
◼ EV / 2024E Revenue: 2.25x – 2.75x
EV / 2024E
Adj. EBITDA3
$1.9 – 2.54
◼ EV / 2024E Adj. EBITDA multiple: 5.5x – 7.0x
EV / 2025E
Adj. EBITDA $2.4 – 3.04
◼ EV / 2025E Adj. EBITDA multiple: 5.5x – 7.0x
Selected precedent
transactions
EV / LTM Q2’23
Adj. EBITDA3
$1.9 – 3.04
◼ EV / LTM Adj. EBITDA: 6.0x – 9.4x
Illustrative discounted
cash flow analysis $2.9 – 3.7
◼ PGR: 1.5 – 2.5%
◼ WACC: 9.5 – 10.5%
◼ Valuation date as of 6/30/2023
Other references
Premia paid
analysis
All-cash
going private
transactions
$3.0 – 3.14 ◼ 35 – 80% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
All-cash
acquisitions $2.9 – 3.04 ◼ 21 – 53% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
Other
metrics
52-week
high / low $2.8 – 3.24 ◼ 52-week trading high and low closing prices
as of September 1, 2023
Analyst target
prices
Unaffected
$2.8 – 3.04 ◼ Represents low and high of analyst target prices
as of April 12, 20236
Analyst target
prices
Current
$3.0 – 3.04 ◼ Represents low and high of analyst target prices
as of September 1, 20236
Analyst target
prices
Intrinsic
$3.0 – 3.14 ◼ Represents low and high of analyst DCF-based
valuations as of September 1, 20236
n.m.
n.m.
n.m.
n.m.
2.50
3.75
3.25
2.15
2.50
3.75
3.94
4.75
4.50
4.00
9.75
5.00
4.25
5.97
4.50
4.00
4.72
Seagull proposal: $4.00
April 12th closing price: $2.76
3.25
Incl. NOL value5
3.92
Current trading implies 8.4x
’24E EBITDA
10.50
Latest Seagull verbal indication: $4.65
7.1x multiple
implies $0 of
equity value |
| PRELIMINARY DRAFT
DCF sensitivity to varying operating assumptions
Does not contemplate illustrative impacts to liquidity and NOL usage
4
3.73
n.m.
5.07
3.04
4.70
1.01
4.53
7.30
7.48
6.08
7.50
6.63
6.12
7.40
Implied per-share DCF midpoint range Base assumption 1,2,3 Item
Sources: Standalone LRP, company filings, FactSet (as of September 1, 2023), Bloomberg (as of September 1, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Sensitivity analyses vs. Standalone LRP
2. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
3. Assumes WACC of 10.0% and PGR of 2.0%
Enterprise sales
growth rate
◼ Enterprise sales decline ~1% in
2023E and grow at a CAGR of
~3.1% from 2024 – 2031E
~3.1%
0% 5%
~50.5%
45% 51% ◼ Adj. EBITDA margin reaches ~50.5%
by 2031E
Terminal
Adj. EBITDA
margin
Residential fiber
terminal
penetration
◼ Residential fiber cohorts reach 40%
penetration by year 6
Cost per home
passed
◼ Blended cost per home passed
increases from ~$850 in 2024 to
~$1,250 by 2027, dropping to ~$725
thereafter (pre-CWIP / Inventory)
Sensitivity range
35% 45%
40%
-$200
vs. base
+$200
vs. base
~$850 – ~1,250; ~$725
Non-video
COGS %
of sales
◼ COGS % of sales decline from
~15.1% in 2023E and stepped down
to 12.0% by 2027E;
held at 12.0% through 2031E
Terminal CapEx
% of sales
◼ “Steady-state” CapEx estimated at
13% of sales in terminal period 10%
13%
15%
Base DCF (ex. NOLs)
midpoint: $5.66
Residential fiber
ARPU growth rate
◼ Existing residential fiber subscriber
ARPU grown at 4.0% p.a.;
new cohort residential fiber
subscriber ARPU grown at 5.0% p.a
~15.0 – 12.0%
-100 bps
vs. base
+100 bps
vs. base
0%;1% 5%; 6%
4%; 5% |
| PRELIMINARY DRAFT
Illustrative share price $2.76 $3.54 $4.00 $4.20 $4.35 $4.65 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50
Implied premia to:
Unaffected (Apr. 12, 2023) $2.76 – 28.3% 44.9% 52.2% 57.6% 68.5% 81.2% 99.3% 117.4% 135.5% 153.6% 171.7%
Current (Sep. 22, 2023) $3.54 (22.0%) – 13.0% 18.6% 22.9% 31.4% 41.2% 55.4% 69.5% 83.6% 97.7% 111.9%
1-month VWAP $2.49 10.9% 42.2% 60.7% 68.7% 74.7% 86.8% 100.8% 120.9% 141.0% 161.1% 181.2% 201.3%
2-month VWAP $2.86 (3.5%) 23.8% 39.8% 46.8% 52.1% 62.6% 74.8% 92.3% 109.7% 127.2% 144.7% 162.2%
3-month VWAP $3.07 (10.1%) 15.3% 30.3% 36.8% 41.7% 51.4% 62.8% 79.1% 95.4% 111.7% 128.0% 144.3%
6-month VWAP $3.54 (22.1%) (0.1%) 12.9% 18.5% 22.7% 31.2% 41.1% 55.2% 69.3% 83.4% 97.5% 111.6%
52-week high (Sep. 12, 2022) $5.97 (53.8%) (40.7%) (33.0%) (29.6%) (27.1%) (22.1%) (16.2%) (7.9%) 0.5% 8.9% 17.3% 25.6%
52-week low (Mar. 24, 2023) $2.15 28.4% 64.7% 86.0% 95.3% 102.3% 116.3% 132.6% 155.8% 179.1% 202.3% 225.6% 248.8%
(×) Fully diluted shares outstanding 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7 118.7
Implied equity value $328 $420 $475 $498 $516 $552 $593 $653 $712 $771 $831 $890
(+) Net debt 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989
(-) NPV of WA assets (68) (68) (68) (68) (68) (68) (68) (68) (68) (68) (68) (68)
(+) Preferred stock (at liquidation pref.) 498 498 498 498 498 498 498 498 498 498 498 498
(+) Other adjustments 93 93 93 93 93 93 93 93 93 93 93 93
Implied enterprise value $2,841 $2,933 $2,988 $3,012 $3,029 $3,065 $3,107 $3,166 $3,225 $3,285 $3,344 $3,403
Memo: implied EV premium – 3.3% 5.2% 6.0% 6.6% 7.9% 9.4% 11.4% 13.5% 15.6% 17.7% 19.8%
Implied multiples
EV / Revenue
2022PF $1,124 2.53x 2.61x 2.66x 2.68x 2.69x 2.73x 2.76x 2.82x 2.87x 2.92x 2.97x 3.03x
LTM Jun-23PF 1,104 2.57 2.66 2.71 2.73 2.74 2.78 2.81 2.87 2.92 2.97 3.03 3.08
2023E (pro forma) 1,095 2.59 2.68 2.73 2.75 2.77 2.80 2.84 2.89 2.94 3.00 3.05 3.11
2024E (pro forma) 1,119 2.54 2.62 2.67 2.69 2.71 2.74 2.78 2.83 2.88 2.94 2.99 3.04
2025E 1,185 2.40 2.47 2.52 2.54 2.56 2.59 2.62 2.67 2.72 2.77 2.82 2.87
EV / Adj. EBITDA
2022PF $354 8.0x 8.3x 8.4x 8.5x 8.6x 8.7x 8.8x 8.9x 9.1x 9.3x 9.4x 9.6x
LTM Jun-23PF 319 8.9 9.2 9.4 9.4 9.5 9.6 9.7 9.9 10.1 10.3 10.5 10.7
2023E (pro forma) 313 9.1 9.4 9.5 9.6 9.7 9.8 9.9 10.1 10.3 10.5 10.7 10.9
2024E (pro forma) 354 8.0 8.3 8.4 8.5 8.6 8.7 8.8 8.9 9.1 9.3 9.5 9.6
2025E 436 6.5 6.7 6.9 6.9 7.0 7.0 7.1 7.3 7.4 7.5 7.7 7.8
Analysis at various prices
Latest Seagull verbal indication implies 9.8x, 8.7x and 7.0x 23E, 24E and 25E Adj. EBITDA,
respectively
5
Sources: Company filings, FactSet (as of September 22, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Calendar day VWAPs; as of April 12, 2023
2. Valuation date as of June 30, 2023 as per Condor Management, Condor Management-provided FDSO of 118.7m as of July 31, 2023
3. NPV of WA proceeds and interim cash flows treated as cash-like item; 2022 – 2024 financials adjusted for pro forma impact of WA divestiture per Condor Management
4. Other adjustments include net, tax-effected PBO and OPEB, NCI and Investments (net tax-effected PBO and OPEB provided per Condor Management, NCI and Investments sourced from Company filings)
5. Projected metrics per Standalone LRP; historical metrics per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of Ohio and Kansas City operations and wireless partnerships
Unaffected
Seagull
Current proposal
2
3
5
2
1
1
1
1
4
3
3
3
3
3
3
3
3
1
st Verbal
indication
2
nd Verbal
indication
Latest
indication |
Exhibit (c)(viii)
| Project Seashore
Fairness opinion analysis
October 14, 2023
1 |
| Disclaimer
1. Section name
2
The accompanying materials were compiled on a confidential basis by Rothschild & Co US Inc. (“Rothschild & Co”) for the use and benefit of the Special Committee (the “Special Committee”) of
the Board of Directors of Consolidated Communications Holdings, Inc. (the “Company” or “Condor”) solely in connection with its evaluation of the transaction referred to herein.
Neither Rothschild & Co nor any of its affiliates, nor any of its or their respective officers, directors, employees, advisors, agents or representatives, represents or warrants as to the accuracy or
completeness of any of the materials set forth herein. Nothing contained in the accompanying materials is, or shall be relied upon as, a promise or representation as to the past, present or
future.
It should be understood that these materials, including any valuations and/or estimates or projections contained in the accompanying materials, were prepared or derived from information
supplied by the Company or derived from public sources, without any independent verification by Rothschild & Co. This information, including any valuations, estimates or projections, involves
numerous and significant assumptions and subjective determinations by the Company’s management and other sources, which may or may not be correct, although the Company has
represented that the materials are reasonably based. Rothschild & Co assumes no responsibility for independent verification of such information and has relied on such information being
complete and accurate in all material respects. Accordingly, no representation or warranty, express or implied, can be made or is made by Rothschild & Co as to the accuracy or completeness
of any such information or the achievability of any such valuations and/or estimates or projections. To the extent such information includes any estimates or projections of future financial
performance, Rothschild & Co has assumed that such estimates or projections have been reasonably prepared on bases reflecting the best currently available estimates and judgments of
management of the Company and the Special Committee (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). The accompanying
material does not represent an opinion as to the prices at which the Company, or any interests therein, actually would be acquired or sold.
Except where otherwise indicated, this presentation speaks as of the date hereof and is necessarily based upon the information available to Rothschild & Co and financial, stock market and
other conditions and circumstances existing and disclosed to Rothschild & Co as of the date hereof. Rothschild & Co does not have any obligation to update, review or reaffirm these materials.
The presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Rothschild & Co. Under no circumstances should the delivery
of this presentation imply that any information or analyses included in this presentation would be the same if made as of any other date.
These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. No single analysis
contained herein can be deemed more or less important than any other analysis and these analyses must be considered, in their totality, with the oral briefing provided by Rothschild & Co. Prior
to entering into any transaction, the Special Committee should determine, without reliance on Rothschild & Co or its affiliates, the economic risks and merits as well as the legal, tax and
accounting characterizations and consequences of any such transaction. In this regard, by accepting these materials, the Special Committee acknowledges that Rothschild & Co is not in the
business of providing (and the Special Committee is not relying on Rothschild & Co for) legal, tax or accounting advice, and the Special Committee should receive (and rely on) separate and
qualified legal, tax and accounting advice. These materials do not constitute an offer or solicitation to sell or purchase any securities.
Rothschild & Co is not acting in any capacity as a fiduciary or agent of the Special Committee, the Board of Directors or the Company.
In the ordinary course of their asset management, merchant banking and other business activities, affiliates of Rothschild & Co may at any time hold long or short positions, and may trade or
otherwise effect transactions, for their own accounts or the accounts of their clients in equity, debt or other securities (or related derivative securities) or financial instruments of the Company or
any of its affiliates or any other company that may be involved in a transaction.
THIS PRESENTATION IS CONFIDENTIAL AND WAS NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR FILING THEREOF UNDER STATE OR FEDERAL SECURITIES LAWS
OR OTHERWISE. THIS PRESENTATION MAY NOT BE COPIED BY, OR DISCLOSED OR MADE AVAILABLE TO, ANY PERSON WITHOUT THE PRIOR WRITTEN APPROVAL OF
ROTHSCHILD & CO.
THIS PRESENTATION IS NOT INTENDED TO BE USED OR RELIED UPON, AND SHOULD NOT BE USED OR RELIED UPON, BY ANY PERSON OTHER THAN THE SPECIAL
COMMITTEE AND MAY NOT BE USED BY ANY OTHER PERSON WITHOUT PRIOR WRITTEN APPROVAL OF ROTHSCHILD & CO. |
| Executive summary
Contents
1
Valuation perspectives
3
Overview of business plan
2
4
9
13
3
Appendix – Valuation supplement
A
16 |
| Executive summary
1
4 |
| Rothschild & Co engagement
5
Rothschild & Co US Inc. (“Rothschild & Co” or “We”) has been engaged by the Special Committee (the “Special Committee”) of the Board of
Directors of Condor (the “Company”) as financial advisor in connection with advising the Special Committee with respect to any potential
transaction (the “Transaction”) proposed by Seagull (together with its affiliated investment funds) and Blue Jay (collectively, referred herein as
the “Seagull Group”) as well as in evaluating potential strategic and financial alternatives to the Transaction, and if requested by the Special
Committee, rendering an opinion as to the fairness, from a financial point of view, to the Company or to the holders of the Company’s common
stock, as applicable, of the consideration to be received by the Company or such holders in a proposed Transaction
To this end, these materials focus on the following:
◼ Review of Condor’s Standalone LRP projections
◼ Valuation of Condor utilizing various industry-standard valuation methodologies
In connection with our engagement, Rothschild & Co has, among other things:
◼ At the direction of the Special Committee, utilized financial forecasts for Condor, prepared and provided by Condor’s management team
(“Management”) and confirmed by the Special Committee and Management on October 12, 2023 (the “Standalone Long Range Plan” or
“Standalone LRP”)
◼ Held discussions with the Special Committee regarding:
□ The proposed Transaction;
□ Past and current business operations and financial condition and prospects of Condor, including the Standalone LRP and the financial
implications thereof;
□ Strategic alternatives available to the Company;
□ Certain other matters believed necessary or appropriate to our inquiry
◼ Held discussions with key members of Management on a regular basis over the course of our engagement
1. SITUATION OVERVIEW 1 Executive summary |
| Proposal overview (1 of 2)
6
Sources: Seagull Group amended Form SC 13D dated April 13, 2023, Merger Agreement, Communication from Seagull Group on September 27, 2023
Notes:
1. Unaffected date is April 12, 2023, the last trading day prior to public announcement of Seagull Group’s non-binding proposal
2. Company’s equity value based on $4.70 offer price per share and FDSO of 118.5m as of October 11, 2023 per Condor Management
~$3.1bn sale of Condor to the Seagull Group
1. SITUATION OVERVIEW 1 Executive summary
Target Condor
Acquiror The Seagull Group
Purchase
price $4.70 per share
Premium
~70% premium to the unaffected price of $2.761
~33% premium to last trading price of $3.53 (on October 13, 2023)
Form of
consideration All cash
Financing
conditions No financing contingency; existing debt to stay in place
Shareholder
approval
Company shareholder approval by a majority of the voting power represented by the outstanding shares that are entitled to vote
as well as a majority of the voting power held by unaffiliated stockholders
Conditions
Execution of a mutually acceptable definitive merger agreement
No material adverse effect
Receipt of certain regulatory approvals
“No shop”
Neither the Company nor its advisors may solicit alternative Acquisition Proposals
Condor has the right to terminate the agreement if it receives an unsolicited Superior Proposal, subject to a termination fee
Termination fee ~$17m (equal to 3% of Company’s equity value2
) |
| Unaffected Current Seagull Group
(4/12/2023) (10/13/2023) proposal
Unaffected (April 12, 2023; $2.76) n.a. 28% 70%
Current (October 13, 2023; $3.53) (22%) n.a. 33%
1-month VWAP (April 12, 2023; $2.49) 11% 42% 89%
2-month VWAP (April 12, 2023; $2.86) (4%) 23% 64%
3-month VWAP (April 12, 2023; $3.07) (10%) 15% 53%
6-month VWAP (April 12, 2023; $3.54) (22%) (0%) 33%
52-week high (November 1, 2022; $5.35) (48%) (34%) (12%)
52-week low (March 24, 2023; $2.15) 28% 64% 119%
Metric Multiple
($m) (x)
Standalone LRP
EV / LTM Jun-23PF Adj. EBITDA $319 9.6x
EV / 2023E Adj. EBITDA (pro forma) 313 9.8x
EV / 2024E Adj. EBITDA (pro forma) 354 8.7x
EV / 2025E Adj. EBITDA 436 7.0x
Consensus
EV / 2023E Adj. EBITDA (pro forma) $295 10.4x
EV / 2024E Adj. EBITDA (pro forma) 331 9.3x
EV / 2025E Adj. EBITDA 365 8.4x
Seagull Group proposed price per share $4.70
(×) Fully diluted shares outstanding 118.5
Implied Condor equity value $557
(+) Total debt 2,192
(+) Net, tax-effected PBO and OPEB 95
(-) Cash and cash equivalents (203)
(-) NPV of WA assets (68)
(+) Preferred stock (at liquidation pref.) 498
(-) Other adjustments (1)
Implied enterprise value $3,070
Proposal overview (2 of 2)
Implied enterprise value1
($m, except per-share data) Implied premia
7
4
5
5
5
5
7
1 Executive summary
~70% premium to the unaffected price of $2.76 and ~33% premium to current price of $3.53
6
2
Sources: Standalone LRP, company filings, press releases, FactSet (as of October 13, 2023 and April 12, 2023)
Notes:
1. Balance sheet as of June 30, 2023 as per Condor Management; FDSO of 118.5m as of October 11, 2023 per
Condor Management
2. Unaffected date is April 12, 2023, the last trading day prior to public announcement of Seagull Group’s non-binding proposal
3. Gross of discounts and deferred debt issuance costs; includes finance leases
4. Tax-effected at 26% tax rate per Condor Management
5. Calendar day VWAP
6. NPV of WA sale proceeds and interim cash flows treated as cash-like item (see p. 17)
7. Other adjustments include NCI and Investments
8. Projected metrics per Standalone LRP; historical metric per Condor Management on like-for-like basis to Standalone LRP
pro forma for divestures of Ohio and Kansas City operations and wireless partnerships; LTM Jun-23 through 2024 financials
adjusted for pro forma impact of WA divestiture per Condor Management
9. Consensus Adj. EBITDA based on FactSet median consensus estimates as of October 13, 2023; 2023 and 2024
adjusted for pro forma impact of WA divestiture per Condor Management
Implied multiples
8
9
3 |
| $3.53
9.1x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Apr-21 Oct-21 Apr-22 Oct-22 Apr-23 Oct-23 EV / NTM EBITDA multiple (x) Stock price ($ actuals)
Q/K filed Seagull events Divestitures Stock price EV / NTM EBITDA
Condor 5-year stock price and valuation multiple1,2,3 history
Condor historical trading performance
Sources: Company filings, press releases, FactSet (as of October 13, 2023)
Notes:
1. Multiples prior to August 9, 2023 (the date of the Q2 2023 Form 10-Q filing) reflect corresponding publicly disclosed historical balance sheet and share information
2. Multiples following August 9, 2023 reflect balance sheet as of June 30, 2023 as per Condor Management; FDSO of 118.5m as of October 11, 2023 per Condor Management
3. EV / NTM EBITDA based on FactSet median consensus estimates; as a result, divestitures do not impact valuation until brokers adjust earnings
April 12, 2023
Seagull Group submits and
publicly announces
going private proposal
March 7, 2022:
Seagull publicly
discloses interest in
increasing ownership
/ acquiring Condor
October 2, 2020:
Seagull closed on
stage one investment
September 14, 2020:
Condor announced
strategic investment
from Seagull
December 7, 2021:
Seagull closed on
stage two investment
Divestiture announcements:
◆ Sep-21: Sale of Ohio assets
◆ Mar-22: Sale of Kansas City assets
◆ Aug-22: Sale of Wireless Partnership
◆ Aug-23: Sale of Washington state assets
8
1 Executive summary |
| Overview of business plan
2
9 |
| 46% 49% 50% 53%
57%
64%
71%
2023E 2024E 2025E 2026E 2027E 2028E 2029E
Standalone LRP: review of key plan assumptions
Source: Standalone LRP
Notes:
1. Includes residential and SMB
2. Reflects total copper + fiber passings; copper + fiber passings remain constant across forecast period at ~2.7m passings
Selected fiber build KPIs
Fiber passings built (000s) % fiberized of ~2.7m2 Cost per passing (pre-CWIP & Inv.; $ actual) total passings
2 Overview of business plan
10
◼ Build plan balances maximization of fiber deployment while managing
liquidity / maintaining covenant compliance
□ By 2027, business generates sufficient free cash flow to re-accelerate fiber build, reaching 71%1
fiber coverage by 2029E
□ Capital expenditure (“CapEx”) cost per fiber passing ramps as
RDOF market obligations are met in next few years
◼ Terminal residential fiber cohort penetration rates (40%) combined with
higher ARPUs vs. legacy copper network result in material residential
sales growth throughout the period
◼ Enterprise revenues are projected to grow at a CAGR of ~3.1% from
2024 – 2031E, leading to an overall recovery of Commercial & Carrier
revenue to 2019 levels after multiple years of negative growth
◼ Operationally, COGS efficiency measures and improved operating
leverage as fiber penetration ramps throughout the period lead to
meaningful Adj. EBITDA margin expansion (~50% by 2031E)
Key assumptions
◼ Standalone LRP reflects a build-out cadence that allows Condor to
remain within its current liquidity constraints with minimal cushion over
the next few years
□ Reaches a low point in liquidity of $11m in 2025
◼ Given limited liquidity, minor fluctuations to the Standalone LRP would
result in liquidity issues unless the fiber build-out is slowed further,
subscriber growth is pursued less aggressively or paused, and / or new
outside capital is injected (which may have a dilutive impact to current
shareholders)
◼ Conversely, acceleration of the plan is limited by near-term liquidity
constraints without raising external capital or outperformance on
penetration / profitability in a challenging market environment
◼ The subsequent analyses do not consider the resulting degradation of
liquidity in situations where assumptions in the Standalone LRP are not
met or the potential valuation impact of a liquidity shortfall
Select observations
222
75
45
60
125
173
200
2023E 2024E 2025E 2026E 2027E 2028E 2029E
$619
$849 $925
$1,190 $1,261
$706 $725
2023E 2024E 2025E 2026E 2027E 2028E 2029E |
| CAGR
$m, unless noted 2020PF 2021PF 2022PF 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E (23-27) (27-31)
Residential fiber $127 $199 $290 $380 $443 $513 $581 $648 $694 37% 12%
Resi copper, video, voice 324 290 262 243 219 203 186 170 156 (9%) (8%)
SMB 91 87 85 86 89 91 94 96 98 (0%) 2%
Enterprise1 295 293 296 306 319 332 343 354 364 2% 3%
Carrier2 146 136 139 141 143 144 146 147 149 (0%) 1%
Other3 133 123 114 108 103 98 94 90 86 (6%) (4%)
Revenue $1,238 $1,222 $1,145 $1,115 $1,128 $1,185 $1,264 $1,316 $1,382 $1,443 $1,505 $1,547 4% 4%
% growth n.a. (1%) (6%) (3%) 1% 5% 7% 4% 5% 4% 4% 3%
Gross profit $1,090 $1,066 $997 $880 $904 $978 $1,059 $1,121 $1,179 $1,234 $1,288 $1,325 6% 4%
% margin 88% 87% 87% 79% 80% 82% 84% 85% 85% 85% 86% 86%
Adj. EBITDA4 $462 $442 $369 $327 $360 $436 $526 $601 $657 $699 $751 $781 16% 7%
% margin 37% 36% 32% 29% 32% 37% 42% 46% 48% 48% 50% 50%
Unlevered free cash flow5 $28 $79 $142 $157 $217 $227 $361 $405 n.a. 27%
% margin 2% 7% 11% 12% 16% 16% 24% 26%
Memo:
CapEx ($495) ($359) ($285) ($274) ($319) ($318) ($334) ($231) ($220) (10%) (9%)
CapEx % of revenue 44% 32% 24% 22% 24% 23% 23% 15% 14%
Change in working capital (17) 7 (2) (6) 4 11 (4) (15) (3) n.a. n.a.
EBITDA - CapEx ($168) $1 $151 $252 $282 $339 $366 $519 $560 n.a. 19%
% conversion (51%) 0% 35% 48% 47% 52% 52% 69% 72%
Cost / passing (pre-CWIP & inventory) $619 $849 $925 $1,190 $1,261 $706 $725 n.a. n.a. 19% n.a.
Summary of Standalone LRP
Notes: Financials as presented include WA results until transaction close in 2024
1. Enterprise revenue includes other commercial revenue (non-recurring and other services including
business systems, joint pole & special projects, commercial video services and other services)
2. Carrier revenue includes other carrier revenue (non-recurring and other services including business
systems, joint pole & special projects, commercial video services and other services)
3. Other revenue includes other subsidy revenue (excluding CAF), CAF / RDOF subsidy revenue, special
access revenue, network / switched access revenue, USF revenue and other products / services rev.
4. Adj. EBITDA excludes cost of stock-based compensation (“SBC”)
5. Unlevered free cash flow per Standalone LRP; calculated as EBIT – taxes + tax depreciation –
stock-based compensation – CapEx + / - change in NWC + net proceeds from asset divestitures;
does not consider generated nor utilized NOLs; negative EBIT results in $0 tax paid;
contemplating H2-2023 unlevered free cash flow for purposes of valuation
6. Defined as respective metric ÷ Adj. EBITDA
Sources: Standalone LRP as approved for Rothschild & Co’s use by the Special Committee on October 12, 2023, pro forma historical periods (2020-2022) provided by Condor Management (normalized to exclude
divestures of Ohio and Kansas City operations and wireless partnerships)
11
6
2 Overview of business plan |
| CAGR
$m 2023E 2024E 2025E 2026E 2027E (23-27)
Adj. EBITDA1 $327 $360 $436 $526 $601 16%
% margin 29% 32% 37% 42% 46%
Build (177) (65) (38) (54) (115) (10%)
Success-based (190) (184) (167) (147) (135) (8%)
Maintenance capex (128) (109) (79) (73) (69) (14%)
CapEx ($495) ($359) ($285) ($274) ($319) (10%)
CapEx % of sales 44% 32% 24% 22% 24%
Adj. EBITDA1
- CapEx ($168) $1 $151 $252 $282 n.m.
% conversion 2
(51%) 0% 35% 48% 47%
Levered free cash flow3
($403) ($143) ($78) $15 $46 n.m.
% conversion 2
(123%) (40%) (18%) 3% 8%
Leverage4,5 6.6x 6.4x 5.4x 4.4x 3.8x n.m.
Memo: Net debt 5 2,159 2,296 2,356 2,336 2,277 n.m.
Cash 15 10 10 10 10 n.m.
Revolver availability 216 79 1 16 62 n.m.
Liquidity6 $231 $89 $11 $26 $72 n.m.
Summary of Standalone LRP (cont’d)
Select cash flow and leverage metrics
Source: Standalone LRP
Notes: Financials as presented include WA results until transaction close in 2024
1. Adj. EBITDA excludes cost of SBC
2. Defined as respective metric ÷ Adj. EBITDA
3. Levered free cash flow per Standalone LRP; calculated as Adj. EBITDA – cash taxes (net of NOLs) – CapEx
+ / - change in NWC – cash interest – finance lease payments – pension / OPEB contributions – one-time items;
does not reflect movements in revolver or net proceeds from asset divestitures
12
2 Overview of business plan
4. Leverage defined as net debt ÷ Adj. EBITDA; does not contemplate additional potential add-backs allowed by debt covenants
5. Net debt net of deferred debt issuance costs
6. Total liquidity based on cash on hand and revolver availability |
| Valuation perspectives
3
13 |
| Overview of valuation methodologies and other references
Selected public
company analysis
◼ Selected publicly-traded companies in the U.S. broadband sector
◼ Analysis based on implied enterprise value multiples of CY 2024 revenue and Adj. EBITDA and CY 2025 Adj. EBITDA
◼ Selected revenue and Adj. EBITDA multiples applied to Condor 2024 revenue and 2024 & 2025 Adj. EBITDA,
respectively, based on Standalone LRP1
◼ Selected precedent acquisition transactions in the U.S. broadband sector
◼ Analysis based on implied transaction enterprise value multiples of last twelve months (LTM) Adj. EBITDA
◼ Selected multiples applied to Condor’s LTM Adj. EBITDA as per Standalone LRP1,2
Selected
precedent
transactions
analysis
◼ Analysis of Standalone LRP
□ Valuation date as of June 30, 2023
□ Perpetuity growth rates of 1.5 – 2.5%
□ Weighted average cost of capital (WACC) of 9.5 – 10.5%
□ Valuation range includes present value of Condor net operating losses which have been valued separately
Illustrative
discounted
cash flow
analysis
Other references
Other
metrics
Premia paid
analysis
◼ Analysis of observed premia to unaffected stock price in all-cash going private transactions and acquisitions
□ Going private transactions include U.S. targets with transaction enterprise values above $250m since 2013 with pre-transaction acquiror ownership greater than 15% and less than 50%
□ Acquisition transactions include U.S. targets with transaction enterprise values between $1.0 – 5.0bn since 2013
◼ Implied premia applied to Condor’s unaffected stock price of $2.76 on April 12, 2023
◼ Implied premia applied to Condor’s current stock price of $3.53 on October 13, 2023
◼ Condor 52-week stock trading range
◼ Equity research analysts stock price targets (both unaffected and following public announcement of Seagull
Group’s going private proposal)
□ Includes both target price and intrinsic valuations (if applicable)
Source: Standalone LRP; FactSet (as of October 13, 2023)
Notes:
1. Financials through 2024E adjusted for pro forma impact of WA divestiture per Condor Management (see p. 17)
2. LTM on like-for-like basis to go-forward business per Condor Management pro forma for divestures of Ohio, Kansas City, Washington operations and wireless partnerships
3 Valuation perspectives
14 |
| 1. Rounded to neared $0.25 except for 52-week high / low and analyst target prices
2. Balance sheet as of June 30, 2023 as per Condor Management: net debt of $1.99bn, net,
tax-effected PBO and OPEB of $94.5m, NCI of $8.0m, Investments of $9.1m and preferred
equity valued at liquidation preference of $498.3m; FDSO of 118.5m as of October 11, 2023
per Condor Management
Sources: Standalone LRP, company filings, FactSet (as of October 13, 2023), Bloomberg (as of October 13, 2023), US Fed, Kroll Cost of Capital Guide
Notes: “n.m” denotes implied per-share prices of less than $0.00
Assessment of valuation methodologies
15
3. Financials through 2024E adjusted for pro forma impact of WA divestiture per Condor Management (see p. 17)
4. NPV of WA proceeds and interim cash flows treated as cash-like item for purposes of EV bridge ($68m)
5. NOL schedule based on Standalone LRP
6. Current analyst target prices based, in part, on take-out price; intrinsic represents DCF-based analysis;
Selection excludes SADIF Investment Analytics
Methodology Per-share value ($ actual)1,2 Implied EV ($bn)2 Assumptions
Core methodologies
Selected
public company
analysis
EV / 2024E
Revenue3,4 $2.5 – 3.1 ◼ EV / 2024E Revenue: 2.25x – 2.75x
EV / 2024E
Adj. EBITDA3,4 $1.9 – 2.5 ◼ EV / 2024E Adj. EBITDA multiple: 5.5x – 7.0x
EV / 2025E
Adj. EBITDA4
$2.4 – 3.0 ◼ EV / 2025E Adj. EBITDA multiple: 5.5x – 7.0x
Selected precedent
transactions
EV / LTM Q2’23
Adj. EBITDA3,4 $1.9 – 3.0 ◼ EV / LTM Adj. EBITDA: 6.0x – 9.4x
Illustrative discounted
cash flow analysis $2.9 – 3.7 ◼ PGR: 1.5 – 2.5%
◼ WACC: 9.5 – 10.5%
Other references
Premia paid
analysis
All-cash
going private
transactions
$3.0 – 3.14
$3.0 – 3.14
◼ 34 – 80% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
◼ 5 – 32% (25th and 75th percentile, respectively)
premia to October 13, 2023 closing price of $3.53
All-cash
acquisitions
$2.9 – 3.04
$3.0 – 3.24
◼ 21 – 53% (25th and 75th percentile, respectively)
premia to April 12, 2023 closing price of $2.76
◼ 21 – 53% (25th and 75th percentile, respectively)
premia to October 13, 2023 closing price of $3.53
Other
metrics
52-week
high / low $2.8 – 3.14 ◼ 52-week trading high and low closing prices
as of October 13, 2023
Analyst target
prices
Unaffected
$2.8 – 3.04 ◼ Represents low and high of analyst target prices
as of April 12, 20236
Analyst target
prices
Current
$3.0 – 3.04 ◼ Represents low and high of analyst target prices
as of October 13, 20236
Analyst target
prices
Intrinsic
$3.0 – 3.14 ◼ Represents low and high of analyst DCF-based
valuations as of October 13, 20236
April 12th closing price: $2.76
Incl. NOL value5
3.53
Current trading implies 8.3x
’24E EBITDA
Seagull Group proposal: $4.70
7.1x multiple
implies $0 of
equity value
3 Valuation perspectives
Reference share prices
◼ Valuation date
as of 6/30/2023
3.75
3.75
5.00
4.75
3.25
4.25
4.25
5.50
n.m.
n.m.
n.m.
n.m.
2.50
4.75
4.50
4.00
3.25 9.75 10.50
2.15
2.50
3.75
3.94
5.35
4.50
4.00
4.72
0.00 |
| Appendix – Valuation supplement
A
16 |
| Washington sale proceeds and interim cash flow NPV and
pro forma impact analysis
$m, fiscal quarter ending Mar-22A Jun-22A Sep-22A Dec-22A Mar-23A Jun-23A Sep-23E Dec-23E Mar-24E Jun-24E Sale
Revenue $5.2 $5.3 $5.2 $5.1 $5.0 $5.1 $5.0 $5.0 $4.8 $4.6
Adj. EBITDA $3.6 $3.7 $3.7 $3.6 $3.5 $3.5 $3.4 $3.4 $3.2 $3.0
(-) Capital expenditures (1.0) (0.9) (1.0) (1.0)
(+) Net proceeds from divestiture 65.0
Unlevered free cash flow $2.4 $2.4 $2.2 $2.0 $65.0
NPV of WA assets at 10.0% WACC 68
17
Sources: Standalone LRP, Condor Management, company filings, Bloomberg (as of October 13, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Historical results based on actual results; projected earnings and cash flows based on extract of Washington financials from Standalone LRP as provided by Management
2. Assumes no cash taxes paid related to earnings and cash proceeds per Condor Management
Historical and projected Washington cash flows1,2 (Illustrative transaction close date of 6/30/2024)
A Appendix – Valuation supplement
$ |
| Memo: implied multiples at Seagull Group proposed price per share
Share %52w Market Enterprise EV / Revenue EV / EBITDA Sales Growth
$m, unless noted price ($) high cap value 2023E 2024E 2025E 2023E 2024E 2025E
Condor (Standalone LRP) $2.76 52% $327 $2,840 2.59x 2.54x 2.40x 9.1x 8.0x 6.5x
Condor (Consensus) $2.76 52% $327 $2,840 2.62x 2.57x 2.47x 9.6x 8.6x 7.8x
ILEC
Lumen $1.32 18% $1,367 $22,386 1.54x 1.62x 1.63x 4.8x 5.0x 5.0x
Frontier $16.61 54% 4,199 13,613 2.36x 2.35x 2.27x 6.5x 6.3x 5.8x
Mean / median 1.95x 1.98x 1.95x 5.6x 5.7x 5.4x
Rural cable
Cable One $649.90 74% $3,714 $6,151 3.64x 3.65x 3.59x 6.6x 6.5x 6.4x
Shentel $21.66 94% 1,113 1,187 4.15x 3.76x 3.39x 13.9x 12.7x 8.6x
Mean / median 3.90x 3.71x 3.49x 10.3x 9.6x 7.5x
Cable
Charter $449.27 99% $76,732 $172,859 3.16x 3.08x 3.03x 7.9x 7.5x 7.3x
Altice $3.05 46% 1,462 26,423 2.88x 2.93x 2.99x 7.4x 7.4x 7.4x
WOW $7.10 49% 599 1,453 2.09x 2.08x 2.07x 5.1x 4.8x 4.4x
Mean 2.71x 2.70x 2.69x 6.8x 6.6x 6.3x
Median 2.88x 2.93x 2.99x 7.4x 7.4x 7.3x
Broadband
ATN International $33.09 67% $528 $1,063 1.40x 1.36x 1.30x 5.7x 5.3x 4.9x
Overall peer mean 2.65x 2.60x 2.53x 7.2x 7.0x 6.2x
Overall peer median 2.62x 2.64x 2.63x 6.6x 6.4x 6.1x
Condor (Standalone LRP) $4.70 88% $557 $3,070 2.80x 2.74x 2.59x 9.8x 8.7x 7.0x
Condor (Consensus) $4.70 88% $557 $3,070 2.83x 2.77x 2.67x 10.4x 9.3x 8.4x
Selected public company analysis: valuation benchmarking
18
Sources: company filings, FactSet (as of October 13, 2023 and April 12, 2023), Standalone LRP
Notes:
1. Condor share price as of April 12, 2023; all other companies as of October 13, 2023
2. Share price as a percent of 52-week high closing prices as of October 13, 2023
3. Valuation date as of June 30, 2023; enterprise value to equity value bridge based on balance sheet
as of June 30, 2023 as per Condor Management; FDSO of 118.5m as of October 11, 2023 per Condor
Management
3,4,5
1
3,4,6
7
2
A Appendix – Valuation supplement
4. NPV of WA proceeds and interim cash flows treated as cash-like item ($68m; see p. 17)
5. Metrics based on Standalone LRP; 2023 – 2024 financials adjusted for pro forma impact of WA
divestiture per Condor Management
6. Metrics based on median consensus estimates as of October 13, 2023; 2023 – 2024 financials
adjusted for pro forma impact of WA divestiture per Condor Management
7. Lumen capitalization pro forma for divestiture of EMEA Business
3,4,5
3,4,6 |
| Target
Acquiror
EV ($bn) $0.3 $1.6 $0.9 $0.7 $0.2 $3.1 $0.3 $2.0 $10.5 $1.4 $7.5
Date Jun-14 Dec-16 Feb-17 Jul-17 Dec-19 Mar-20 Jan-21 Dec-13 Jan-14 May-19 Aug-21
Sources: company filings, press releases
Notes:
1. Transaction multiples recognized on an LTM EBITDA basis as of announcement date unless otherwise noted
2. Based on Seagull Group proposed price per share of $4.70; per Balance sheet as of June 30, 2023 as per
Condor Management; FDSO of 118.5m as of October 11, 2023 per Condor Management; NPV of WA sale
proceeds and interim cash flows treated as cash-like item (see p. 17)
3. LTM Adj. EBITDA per Condor Management on like-for-like basis to Standalone LRP pro forma for divestures of
Ohio and Kansas City operations and wireless partnerships; adjusted for pro forma impact of WA divestiture per
Condor Management
Selected precedent transactions
Select U.S. broadband sector transactions since 20131
Full company acquisition Corporate carve-outs
Mean: 5.5x
Median: 5.2x
Mean: 6.8x
Median: 6.4x
19
(CA, TX, FL
assets)
5
(CT assets)
4
(WA, OR, ID,
MT assets)
6
(ILEC assets)
7
A Appendix – Valuation supplement
4. Acquisition of wireline operations in Connecticut; 2014 PF Day 1 EBITDA from company
investor presentation issued 12/17/13
5. Sale of wireline operations in California, Texas and Florida based on total consideration
and segment EBITDA from investor presentation 2/5/15 and 8-K 6/2/15, respectively
6. Sale of operations and associated assets in Washington, Oregon, Idaho and Montana
7. Sale of ILEC business including consumer, SMB, wholesale and mostly copper-served
enterprise customers and assets in 20 states; multiple as-disclosed by Lumen based on
2020E EBITDA
Seagull Group
proposal: 9.6x2,3
7.3x
6.0x
9.4x
6.1x 6.4x
7.6x
5.0x 4.8x
6.7x
5.0x
5.5x
7 |
| 3
Illustrative discounted cash flow analysis
20
Projected cash flows1
$m H2-2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Total revenue $564 $1,128 $1,185 $1,264 $1,316 $1,382 $1,443 $1,505 $1,547 $1,547
% growth n.m. 5.1% 6.6% 4.1% 5.0% 4.5% 4.3% 2.8%
Adj. EBITDA 175 360 436 526 601 657 699 751 781 781
% margin 30.9% 31.9% 36.8% 41.6% 45.7% 47.6% 48.4% 49.9% 50.5%
(-) One-time items -- (15) (13) (15) (15) (15) (15) (15) (15) (15)
(-) D&A (241) (328) (241) (206) (187) (227) (265) (283) (276) (201)
(+) Gain on asset divestitures -- 60 -- -- -- -- -- -- -- --
EBIT (66) 77 181 305 399 415 419 453 489 564
(-) Tax at 26% marginal rate -- (20) (47) (79) (104) (108) (109) (118) (127) (147)
NOPAT (66) 57 134 226 296 307 310 335 362 418
(+) D&A 241 328 241 206 187 227 265 283 276 201
(-) CapEx (186) (359) (285) (274) (319) (318) (334) (231) (220) (201)
(+) Untaxed proceeds from asset divestitures -- 5 -- -- -- -- -- -- -- --
(-) Stock-based compensation (5) (10) (10) (10) (10) (10) (10) (10) (10) (10)
(+/-) Source / (use) of NWC (85) 7 (2) (6) 4 11 (4) (15) (3) (3)
Unlevered FCF ($101) $28 $79 $142 $157 $217 $227 $361 $405 $405
Terminal
period
Sources: Standalone LRP, company filings, Bloomberg (as of October 13, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Projected unlevered cash flows as per Standalone LRP
2. Terminal period assumptions per Condor Management and approved by the Special Committee;
D&A assumed equal to CapEx per Condor Management
2
5
4
3
A Appendix – Valuation supplement
3. Per Condor Management, one-time items are tax deductible; SBC not tax deductible
4. 26% tax rate as per Condor Management
5. 50% of full year 2023E D&A per Condor Management and approved by the Special Committee
5 |
| Sources: Standalone LRP, company filings, Bloomberg (as of October 13, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Projected unlevered cash flows as per Standalone LRP
2. Terminal period assumptions per Condor Management and approved by the Special Committee;
D&A assumed equal to CapEx per Condor Management
3. Valuation date as of June 30, 2023
Enterprise value ($m) Implied terminal multiple
at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $3,354 $3,440 $3,533 $3,631 $3,737 6.6x 6.8x 7.1x 7.3x 7.6x
9.75% 3,223 3,303 3,388 3,479 3,576 6.4x 6.6x 6.8x 7.1x 7.3x
10.00% 3,100 3,174 3,253 3,337 3,426 6.2x 6.4x 6.6x 6.8x 7.1x
10.25% 2,985 3,053 3,126 3,204 3,286 6.0x 6.2x 6.4x 6.6x 6.9x
10.50% 2,876 2,940 3,007 3,079 3,155 5.9x 6.0x 6.2x 6.4x 6.6x
Implied share price Implied share price (incl. NOLs)
at PGR of at PGR of
WACC 1.50% 1.75% 2.00% 2.25% 2.50% 1.50% 1.75% 2.00% 2.25% 2.50%
9.50% $6.52 $7.25 $8.03 $8.86 $9.76 $7.19 $7.92 $8.70 $9.53 $10.42
9.75% 5.42 6.09 6.81 7.58 8.40 6.08 6.75 7.47 8.24 9.06
10.00% 4.38 5.01 5.67 6.38 7.13 5.04 5.66 6.33 7.04 7.79
10.25% 3.41 3.99 4.60 5.26 5.95 4.06 4.64 5.26 5.91 6.61
10.50% 2.49 3.03 3.60 4.20 4.85 3.14 3.68 4.25 4.85 5.50
Illustrative discounted cash flow analysis sensitivities
21
3
Sensitized valuation range1,2
4 4,5 Terminal value accounts for approximately
71 – 77% of DCF enterprise value
4. Valuation date as of June 30, 2023; enterprise value to equity value bridge based on balance
sheet as of June 30, 2023 as per Condor Management; FDSO of 118.5m as of October 11, 2023
per Condor Management
5. See p. 23
A Appendix – Valuation supplement |
| 3.75
n.m.
5.08
3.05
4.70
1.01
4.53
7.32
7.49
6.09
7.51
6.64
6.13
7.41
Illustrative DCF sensitivity to varying operating assumptions
Does not contemplate potential impacts to liquidity and NOL usage
22
Appendix – Valuation supplement
Implied per-share DCF midpoint range Base assumption 1,2,3 Item
Sources: Standalone LRP, company filings, Bloomberg (as of October 13, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
1. Sensitivity analyses vs. Standalone LRP
2. Valuation date as of June 30, 2023; enterprise value to equity value bridge based on balance sheet as of June 30, 2023 as per Condor Management;
FDSO of 118.5m as of October 11, 2023 per Condor Management
3. Assumes WACC of 10.0% and PGR of 2.0%
~3.1%
0% 5%
~50.5%
45% 51%
Sensitivity range
35% 45%
40%
-$200
vs. base
+$200
vs. base
~$850 – ~1,250; ~$725
10%
13%
15%
Base DCF (ex. NOLs)
midpoint: $5.67
Enterprise sales
growth rate
◼ Enterprise sales decline ~1% in
2023E and grow at a CAGR of
~3.1% from 2024 – 2031E
◼ Adj. EBITDA margin reaches ~50.5%
by 2031E
Terminal
Adj. EBITDA
margin
Residential fiber
terminal
penetration
◼ Residential fiber cohorts reach 40%
penetration by year 6
Cost per home
passed
◼ Blended cost per home passed
increases from ~$850 in 2024 to
~$1,250 by 2027, dropping to ~$725
thereafter (pre-CWIP / Inventory)
Non-video COGS
% of sales
◼ COGS % of sales decline from
~15.1% in 2023E and stepped down
to 12.0% by 2027E;
held at 12.0% through 2031E
Terminal CapEx
% of sales
◼ “Steady-state” CapEx estimated at
13% of sales in terminal period
Residential fiber
ARPU growth rate
◼ Existing residential fiber subscriber
ARPU grown at 4.0% p.a.;
new cohort residential fiber
subscriber ARPU grown at 5.0% p.a
~15.0 – 12.0%
-100 bps
vs. base
+100 bps
vs. base
0%; 1% 5%; 6%
4%; 5%
A |
| Illustrative NOL valuation analysis
23
$m H2-2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
Memo: Taxable income $52 $114 $196 $266 $278 $280 $304 $329
Restricted federal NOLs utilized 52 89 -- -- -- -- -- --
Unrestricted federal NOLs utilized -- 20 157 171 -- -- -- --
Total federal NOLs used 52 109 157 171 -- -- -- --
(x) Tax rate 21% 21% 21% 21% 21% 21% 21% 21%
FV of federal NOL benefit 11 23 33 36 -- -- -- --
Projected NOL utilization1,2
3
4
6
1. Projected federal NOL generation and utilization per Standalone LRP
2. Valuation date as of June 30, 2023
3. Restricted federal NOLs generated prior to 2018
4. Unrestricted federal NOLs generated during or after 2018; subject to 80% of taxable income limitation
Sources: Standalone LRP, company filings, Bloomberg (as of October 13, 2023), US Fed, Kroll Cost of Capital Guide
Notes:
5. 21% federal tax rate as per Condor Management
6. Valuation date as of June 30, 2023; FDSO of 118.5m as of October 11, 2023
per Condor Management
5
Discount Cumulative Incr. value
rate PV per share
9.50% $79.0 $0.67
9.75% 78.5 0.66
10.00% 78.0 0.66
10.25% 77.5 0.65
10.50% 77.0 0.65
A Appendix – Valuation supplement |
| Implied levered beta Implied cost of equity Implied WACC
Gross Gross Pre-tax cost at unlevered beta of at unlevered beta of at unlevered beta of
debt / cap debt / equity of debt 0.40 0.49 0.60 0.40 0.49 0.60 0.40 0.49 0.60
30.0% 42.9% 10.0% 0.53 0.64 0.79 10.7% 11.5% 12.5% 9.7% 10.3% 10.9%
40.0% 66.7% 10.0% 0.60 0.73 0.90 11.2% 12.1% 13.2% 9.7% 10.2% 10.9%
50.5% 102.1% 10.0% 0.70 0.86 1.05 11.9% 12.9% 14.2% 9.6% 10.1% 10.8%
60.0% 150.0% 10.0% 0.84 1.03 1.27 12.8% 14.1% 15.7% 9.6% 10.1% 10.7%
70.0% 233.3% 10.0% 1.09 1.33 1.64 14.5% 16.1% 18.2% 9.5% 10.0% 10.6%
Market Debt Pref. Debt / Debt / Tax Beta
Peer cap ($m) ($m) eq. ($m) equity cap rate (%) Levered Unlevered Re-levered
Frontier $4,199 $11,424 – 272% 73% 25% 1.14 0.37 0.66
Cable One 3,714 3,790 – 102% 51% 25% 1.02 0.58 1.02
Shentel 1,113 127 – 11% 10% 25% 1.01 0.93 1.64
WOW 599 877 – 146% 59% 25% 1.03 0.49 0.86
ATN International 528 539 – 102% 51% 25% 0.72 0.41 0.72
75th percentile 59% 1.03 0.58
Mean 49% 0.98 0.55
Median 51% 1.02 0.49
25th percentile 51% 1.01 0.41
Condor $327 $2,192 $498 823% 89% 26% 1.06 0.15 0.26
Cost of equity
Risk-free rate 5.0%
Levered beta 0.86
Equity risk premium 6.8%
Size premium 2.2%
Cost of equity 12.9%
Cost of debt
Cost of debt (pre-tax) 10.0%
Tax shield (2.6%)
Cost of debt (post-tax) 7.4%
Weighted average cost of capital (WACC)
24
Selected public company beta analysis
Implied WACC
Based on CAPM analysis and
historical trading yields,
estimated WACC range for
Condor is 9.5 - 10.5%
1
2
3
3
4
5
6
7
8
9 10 10 8
1. Based on median gross debt to capital ratio of peer references
2. Based on peer median 2-year adjusted historical beta (weekly periodicity, regressed against S&P 500) per
Bloomberg (as of October 13, 2023)
3. Unlevered beta = Bloomberg adjusted beta ÷ ( 1+ ( 1 – marginal tax rate) × D/E )
4. Based on current yield on 20-year US Treasury (as of October 13, 2023)
5. Based on the average of Kroll’s Supply-side ERP methodology (6.4%) and Historical ERP methodology
(7.2%) per Kroll’s Cost of Capital Guide (as of December 31, 2022)
6. Based on Kroll’s size premia analysis per Kroll’s Cost of Capital Guide (9th decile, as of December 31, 2022)
Sources: company filings, FactSet (as of October 13, 2023 and April 12, 2023), Bloomberg (as of October 13, 2023 and April 12, 2023), US Federal Reserve, Kroll Cost of Capital Guide, Pitchbook LCD Research
Notes:
7. Average of Single-B new-issue first-lien yield to maturity (Pitchbook LCD
Research) and Single-B US High Yield Index Semi-Annual Yield to Worst (FRED)
8. 26% tax rate as per Condor Management
9. Condor beta and share price as of April 12, 2023; Valuation date as of June 30,
2023 as per Condor Management; Balance sheet as of June 30, 2023 as per
Condor Management; FDSO of 118.5m as of October 11, 2023 per Condor
Management
10. Illustratively includes preferred equity as debt-like item
A Appendix – Valuation supplement |
| 34%
51%
63%
80%
25th percentile Median Mean 75th percentile
Implied Condor share price based on $2.76 unaffected price:
$3.34 $3.64 $3.99 $4.23 21%
32%
45%
53%
25th percentile Median Mean 75th percentile
Premia paid analysis: premia to unaffected price
25
Going private transactions1 Public acquisition transactions2
A Appendix – Valuation supplement
Implied Condor share price based on $2.76 unaffected price:
$3.71 $4.18 $4.50 $4.97
Sources: company filings, Refinitiv, FactSet (as of October 13, 2023)
Notes:
1. Includes all-cash going private transactions of U.S. companies with enterprise values of greater than $250m led by shareholders with ownership between 15% and 50% since January 1, 2013
2. Includes all-cash acquisitions of U.S. companies by third parties with enterprise values of $1.0 – 5.0bn since January 1, 2013; premium to one day prior to announcement date or date
transaction publicly rumored |
| Implied Condor share price based on 10/13/2023 closing price of $3.53:
$4.27 $4.65 $5.10 $5.41
Implied Condor share price based on 10/13/2023 closing price of $3.53:
$3.69 $4.08 $4.80 $4.65 5%
16%
36%
32%
25th percentile Median Mean 75th percentile
Premia paid analysis: premia to last trading price
26
Going private transactions1 Public acquisition transactions2
Sources: company filings, Refinitiv, FactSet (as of October 13, 2023)
Notes:
1. Includes all-cash going private transactions of U.S. companies with enterprise values of greater than $250m led by shareholders with ownership between 15% and 50% since January 1, 2013
2. Includes all-cash acquisitions of U.S. companies by third parties with enterprise values of $1.0 – 5.0bn since January 1, 2013; premium to one day prior to announcement date or date
transaction publicly rumored
A Appendix – Valuation supplement
21%
32%
45%
53%
25th percentile Median Mean 75th percentile |
| –
$2.00
$4.00
$6.00
$8.00
$10.00
-
20%
40%
60%
80%
100%
Oct-21 Apr-22 Oct-22 Apr-23 Oct-23
% of ratings
Buy Hold Sell Share price Target price
$4.50
$2.50
$4.00
$4.00
$3.75
$4.00
Analyst price targets
27
Analyst sentiment over time1 Analyst price targets2
Number of broker recommendations
4 4 4 4 4
Target price as of Unaffected date
Current price target
Average target price over time1
Memo: $3.94 based on DCF
Memo: Scenario weighted; 75% based on $4.00 Seagull Group proposal
and 25% based on average of $4.72 DCF valuation and
$1.58 2023 EV / OIBDA valuation (9.5x)
Memo: $4.00 based on DCF
Sources: FactSet (as of October 13, 2023), Bloomberg (as of October 13, 2023)
Notes:
1. Target prices based on 100-day FactSet consensus window
2. Selection excludes SADIF Investment Analytics
A Appendix – Valuation supplement
$ actual Oct-21 Apr-22 Oct-22 Apr-23 Oct-23
Average target price $8.17 $5.50 $5.83 $4.00 $3.92
% Premium vs. spot 10.4% (7.6%) 12.8% 3.4% 11.0% |
Exhibit (c)(ix)
| March 2023
Discussion materials |
| Agenda
Page
1 Consolidated trading update and industry backdrop 1
2 Appendix 10 |
| CNSL public market overview
Stock price performance since 01/01/2021 (indexed to 100)
Source: Company filings, Factset as of 03/10/23, Wall Street research
S&P500
Public market overview
($mm)
Current price (03/10/23) $2.63
% of 52-week high 31.0%
Diluted shares outstanding 117.8
Market capitalization $310
Plus: Debt 2,283
Less: Cash (414)
Plus: Minority interests 8
Plus: Preferred stock 477
Firm value $2,664
Less: Unconsolidated investments (10)
Adjusted firm value $2,654
Valuation (Street) Metric Multiple
Adj FV / Revenue
CY2023E $1,143 2.3x
CY2024E 1,151 2.3x
Adj FV / EBITDA (post-SBC)
CY2023E $311 8.5x
CY2024E 343 7.7x
Leverage
Total debt / LTM EBITDA (pre-SBC) $384 5.9x
Net debt / LTM EBITDA (pre-SBC) 384 4.9x
1 |
| 8.5x 6.8x 5.1x
Consumer broadband providers’ current footprint and passings target
Adj. FV / 2023 EBITDA (post-sbc)
3 Net debt / LTM EBITDA (pre-sbc)
3
22.0
5.2
3.1 1.0
Q4 2022 fiber passings (mm)
30.0+
10.0 +
9.0 2.0
12.0
Fiber target passings (mm)
27% 35% 32%
% EBITDA margin:
70% 67% 50% 41%
% of Legacy footprint targeted for Ftth
73%
52% 50% 34%
% of Fiber target passings completed
Source: Company filings, Factset as of 03/10/23, Wall Street research
1
Includes saleable consumer and business locations 2 Average of 8mm to 10mm fiber addressable location opportunity 3 Debt is inclusive of pensions of $124mm for Consolidated, $2.4bn for Lumen, and $1.1bn for Frontier, tax-affected at respective applicable tax rate; 4 CNSL reiterated its target passings from 2025 to 2026; 5 Based on EBITDA (pre-SBC) from continuing operations only
4.9x 3.8x 3.8x
1 1
Historical targets
2
(2025) (2025 / 2026) (2026)4
(2025)
5
2 |
| 3,250
605
988
133 72
550
403
1,224 2,250
500
900
175
100
225
1,300
Many consumer broadband providers missed build targets for 2022 and
are moderating their build pace for 2023
Source: Company reports, MoffettNathanson estimates and analysis
2022 Fiber deployment surplus / deficit vs. Beginning of year targets
(000s)
(500)
(395)
(312)
(27)
(3)
0 3
224
Shift driven by cost inflation, labor availability, funding costs and ability of sales & installs to keep up
2022 Actual build
1,600 1,600
N/A
2022 Fiber deployment vs. 2023 Targets (000s)
2023 Target Build - Prior
2023 Target Build - Current
400
3,750
1,750
Target adjusted to account
for ~2mm unsaleable
locations already built
3 |
| Company YTD 1 yr ago 2 yr ago 3 yr ago
(22%) (68%) (89%) (85%)
(3%) (41%) (48%) (31%)
(10%) (56%) (65%) (59%)
1% (22%) (38%) (10%)
6% (45%) (43%) 106%
18% (9%) (64%) (57%)
(27%) (53%) (63%) (57%)
(4%) (6%) N/A N/A
(49%) (75%) (81%) (76%)
(0%) 13% 9% 64%
0% 5% (19%) (32%)
(7%) (31%) (36%) (35%)
S&P 500 1% (9%) (1%) 34%
Traditional Broadband has suffered significant declines from pre-Covid
levels
Source: Factset as of 03/10/23
1 Represents total return performance; 2 Weighted average of Wireless companies that include T, TMUS and VZ; 3 Weighted average of FttH Upgrade companies that include CNSL, FYBR, LUMN and SHEN; 4 Weighted average of
cable companies that include ATUS, CABO, CMCSA, CHTR ad WOW
1-year stock performance (indexed to 100)1
FttH Upgrade3
S&P 500
Cable4
FttH vs. S&P: 1-year stock performance (indexed to 100)1
S&P 500
Cable vs. S&P: 1-year stock performance (indexed to 100)1 Share price performance
S&P 500
4
Wireless2
(for reference only) |
| 9.6x
11.2x
18.9x
8.6x
6.6x
10.7x
5.8x
6.3x
5.4x
8.4x
7.4x
6.3x
8.2x
11.2x
15.2x
8.7x
5.8x
15.1x
6.1x
7.0x
4.5x
8.0x
6.6x
7.5x
7.9x
7.0x
6.8x
6.2x
5.8x
14.0x
8.5x
6.8x
5.1x
8.6x
6.4x
6.4x
(87.7%) (85.8%)
(38.5%) (56.2%)
(63.4%) (66.5%)
(22.9%) (37.0%)
29.5% (52.1%)
Median: (38.5%) (56.2%)
(61.4%) (37.5%)
(64.0%) (70.2%)
NA (19.1%)
(79.7%) (78.6%)
Median: (64.0%) (53.9%)
41.8% 9.2%
(36.7%) (9.6%)
(37.0%) (32.1%)
Median: (36.7%) (9.6%)
Macroeconomic backdrop has compressed both multiples and share prices
Competition from FttH and FWA has taken Cable market share and challenged Cable valuations
Source: Company filings, Wall Street research, Factset as of 03/10/23; 1 Pre-COVID figures as of 02/21/20; 2 Cable highs figures as of 09/22/21; 3 Post-bankruptcy figure as of 05/07/21
Pre-COVID1 Cable highs2
Cable FttH upgrade
Share price ∆ since Adj. FV / EBITDA as of Multiple + / – Since
Pre-COVID1 Cable highs2
Company
Range: 5.8x – 18.9x
Median: 8.5x
Range: 6.1x – 15.2x
Median: 8.1x
Range: 6.2x – 14.0x
Median: 6.9x
Wireless
(for reference only)
Pre-COVID1
(FV / 2020E EBITDA)
Cable highs2
(FV / 2022E EBITDA)
Current
(FV / 2023E EBITDA)
3
7.4x 7.5x 6.4x
6.1x 6.6x 7.7x
9.6x 8.7x 6.8x
(1.7x) (0.3x)
(4.2x) (4.2x)
(12.1x) (8.4x)
(2.3x) (2.5x)
(0.7x) (0.0x)
(2.3x) (2.5x)
3.3x (1.1x)
2.7x 2.4x
0.5x (0.2x)
(0.3x) 0.7x
1.6x 0.2x
0.2x 0.7x
0.1x (0.2x)
(1.0x) (1.1x)
0.1x (0.2x)
5 |
| Selected U.S. FttH / consumer broadband transactions
6
7.8x1
8.4x1
12.7x1
6.5x1
7.3x1
8.1x 2
7.6x
10.1x
9.4x 9.5x
8.3x
4.8x
11.5x
8.2x
13.6x
11.6x
10.1x
11.7x
5.0x
7.2x
15.0x
17.8x
12.4x
4.9x
17.2x
24.1x
11.0x
Target
Acquiror
Date Mar
2015
May
2015
May
2015
Sep
2015
Aug
2016
Dec
2016
Jan
2017
Mar
2017
May
2017
July
2017
July
2017
Apr
2019
May
2019
Mar
2020
Jun
2020
Sep
2020
Nov
2020
Jan
2021
Feb
2021
Mar
2021
Jun
2021
Size ($bn) $10.4bn $9.1bn $78.7bn $17.7bn $2.3bn $1.5bn $0.7bn $0.7bn $2.4bn $1.4bn $0.3bn $0.5bn $1.4bn $2.9bn N/A $0.6bn $8.1bn $0.3bn $2.2bn $0.3bn $1.7bn
N.V.
Source: Company filings, Wall Street research, press releases
1 Adjusted for value of tax assets and synergies; 2 Adjusted for synergies; 3 Adjusted for value of tax asset; 4 Represents latest FY multiple
Note: Altice / Cablevision: 6.1x multiple based on consolidated metrics which include ($147mm) of Media and other; 6.5x multiple based on Cable operations and Lightpath metrics only; 8.8x multiple based on consolidated metrics
which include ($147mm) of Media and other; 8.8x multiple based on Cable operations and Lightpath metrics only; TPG / RCN Grande: 8.3x multiple based on estimate from equity research; CDPQ / Cogeco: CDPQ’s investment in
Atlantic Broadband and Metrocast is for a 21% (non-control) position in the pro forma company; CDPQ acquired 21% equity stake for $315mm in cash; Cable One / Mega Broadband: Cable One acquired 45% equity stake for
$574mm in cash; Cable One / Hargray: 17.2x multiple based on 4Q20 LQA EBITDA; Altice / Morris: 7.4x multiple based on 2022E EBITDA including estimated run-rate synergies and PV of tax benefits; 24.1x multiple based on
4Q20 LQA EBITDA; Rogers / Shaw: 10.7x multiple based on 2021E EBITDA; Astound & Atlantic Broadband / WOW!: Astound to acquire WOW!’s Cleveland and Columbus service areas, Atlantic Broadband to acquire WOW!’s
Chicago, Evansville, and Anne Arundel service areas at a multiple of 10.9x for the Atlantic Broadband transaction and a combined multiple of 11.0x; Atlantic Broadband / WOW! multiple of 10.9x is on a synergized EBITDA
FV / EBITDA multiples
N.V.
8.8x
6.5x
6.1x
FV / 1-yr fwd EBITDA
7.4x
12.7x1
FV / LTM EBITDA
10.9x
8.8x2
8.8x 9.0x 3
3
8.4x2
6.6x1
8.6x2
8.4x1
Northwest
assets
4
3 |
| % conversion
NM / NM NM / NM NM / NM
$1,135 $1,143 $1,143 $1,151 $1,157 $1,187
2023E 2024E 2025E
Pre Q4'22 earnings Street
$495
$441 $442 $447 $434 $459
2023E 2024E 2025E
Pre Q4'22 earnings Street
Revenue EBITDA (post-sbc)
Capex EBITDA (pre-sbc) – Capex
% y/y growth
(1%) / (4%) 1% / 1% 1% / 3%
% revenue
44% / 52% 39% / 44% 37% / 44%
$346 $363 $384
$311 $343
$397
2023E 2024E 2025E
Pre Q4'22 earnings Street
% margin
30% / 27% 32% / 30% 33% / 33%
Summary of CNSL’s financial projections
% y/y growth
(10%) / (17%) 5% / 10% 6% / 16%
Source: Factset, Broker reports as of 03/10/23
’23-’25 CAGR 1.0% / 1.9% ’23-’25 CAGR 5.4% / 12.9%
’23-’25 CAGR (6.4%) / 2.0% ’23-’25 CAGR NM / NM
0.8% 0.8% 2.5%
(10.9%) 1.2% 5.8%
(10.0%) (5.6%) 3.3%
($139)
($68)
($39)
($120)
($94)
($52)
2023E 2024E 2025E
Pre Q4'22 earnings Street
(13.6%) 39.3% 35.2%
7 |
| Areas of discussion and focus
Analyst Sentiment & Expectations
Revenue estimates | Last 2 years
EBITDA estimates | Last 2 years
Capex estimates | Last 2 years
⚫ FY22 results in line or ahead of research analyst expectations,
though a decline in 2023 guidance likely pushes the full inflection
point on EBITDA growth for the Company to 2024
⚫ Penetration rates and ARPU appear in line or ahead of street
estimates
⚫ Research analysts focused on the achievement of forecast
passings growth and discipline to stay-in-line with publicly stated
cost targets
⚫ Company appears to have adequate near-term liquidity due to
$600mm+ in assets sales in FY22, however believes cash could
become tight by the end of 2023 (though this can be offset with
additional $200mm of asset sales)
Current research analysts’ recommendations
Source: Factset estimates and Research Analysts as of 03/10/2023
1 Represents the upside / (downside) of the current price target of the current price (as of the publish date).
Broker Rec. Date
Current
Target
Price
Prior
Target
Price
Upside/
Downside1
Metho-dology Multiple
Citigroup Sell 3/1/23 $2.50 NA (17)% NA NA
Cowen Hold 3/1/23 $4.50 $6.50 49% DCF 7.7x ’23
EBITDA
Wells
Fargo Hold 3/1/23 $4.00 $7.00 32% DCF 6.6x ‘23
EBITDA
Median $4.00 $6.75 32%
$ 50
$ 250
$ 450
Mar-2021 Sep-2021 Mar-2022 Sep-2022 Mar-2023
2023 Capex 2024 Capex 2025 Capex 2026 Capex
$ 250
$ 450
$ 650
Mar-2021 Sep-2021 Mar-2022 Sep-2022 Mar-2023
2023 EBITDA 2024 EBITDA 2025 EBITDA 2026 EBITDA
$ 1,000
$ 1,200
$ 1,400
$ 1,600
Mar-2021 Sep-2021 Mar-2022 Sep-2022 Mar-2023
2023 Revenue 2024 Revenue 2025 Revenue 2026 Revenue
8 |
| Evolution of Research analyst Perspectives
Research analyst target prices have tracked down with overall stock price, with 2 of the 3 analysts aligned around a hold rating
Source: Research Analysts as of 03/10/2023
# Analysts 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
33% 33% 33% 33%
67%
67%
67% 67%
100%
100% 100%
100%
67% 67% 67%
67%
67%
67%
67% 67% 67%
33% 33% 33% 33% 33% 33% 33% 33% 33%
$1.75
$3.50
$5.25
$7.00
$8.75
$10.50 (Price ($)
Buy Hold Sell Price Target Price
9 |
| Agenda
Page
1 Consolidated trading update and industry backdrop 1
2 Appendix 10 |
| Fiber - trading metrics
FV / EBITDA FV / EBITDA (growth adj.) FV / (EBITDA - Capex) P / LFCF / share
($mm USD, except share price)
Share price as of
03/10/23
% of 52
week high Market cap
Adj. firm
value CY2023E CY2024E CY2023E CY2024E CY2023E CY2024E CY2023E CY2024E
Net
leverage
Dividend
yield
Cable
Altice $3.58 27.2% $1,678 $26,902 7.9x 7.8x NM 8.4x 16.3x 15.6x 6.0x 3.7x 6.3x NA
Charter 329.49 56.4% 56,448 152,018 7.0x 6.8x 3.0x 1.7x 13.8x 14.0x 10.9x 10.5x 4.5x NA
Cable One 643.01 40.8% 3,711 6,185 6.8x 6.7x 2.9x 3.1x 12.1x 11.7x 10.9x 10.4x 4.0x 1.8%
Comcast 35.31 72.9% 150,458 233,464 6.2x 5.9x 2.1x 1.2x 9.3x 8.7x 11.7x 10.1x 2.5x 3.3%
WideOpenWest 9.65 42.1% 846 1,542 5.8x 5.4x 2.1x 0.7x 38.8x 30.3x 49.4x NM 2.5x NA
Mean 47.9% 6.7x 6.5x 2.5x 3.0x 18.1x 16.1x 17.8x 8.7x 4.0x 2.5%
Median 42.1% 6.8x 6.7x 2.5x 1.7x 13.8x 14.0x 10.9x 10.3x 4.0x 2.5%
FttH Upgrade
Shentel $18.69 72.1% $954 $976 14.0x 9.8x 3.2x 0.2x NM NM NM NM 0.4x 0.4%
Consolidated Communications 2.63 31.0% 310 2,654 8.5x 7.7x NM 0.8x NM NM NM NM 4.9x NA
Frontier 24.34 78.9% 6,110 13,931 6.8x 6.6x 3.6x 1.6x NM NM NM NM 3.8x NA
Lumen 2.68 21.4% 2,757 23,990 5.1x 5.3x NM NM 14.4x 18.5x 44.1x 29.6x 3.8x NA
Mean 50.8% 8.6x 7.4x 3.4x 0.9x 14.4x 18.5x 44.1x 29.6x 3.2x 0.4%
Median 51.5% 7.7x 7.2x 3.4x 0.8x 14.4x 18.5x 44.1x 29.6x 3.8x 0.4%
Wireless (for reference only)
T-Mobile $139.51 90.4% $171,520 $246,641 8.6x 8.0x 0.8x 0.9x 13.1x 11.6x 12.5x 9.7x 2.8x NA
AT&T 18.43 80.7% 132,067 277,066 6.4x 6.3x 1.8x 2.6x 13.0x 11.2x 8.4x 7.8x 3.4x 6.0%
Verizon 36.68 66.1% 154,828 307,261 6.4x 6.3x NM 3.8x 10.6x 9.8x 9.1x 8.0x 3.1x 7.1%
Mean 79.0% 7.2x 6.9x 1.3x 2.4x 12.3x 10.9x 10.0x 8.5x 3.1x 6.6%
Median 80.7% 6.4x 6.3x 1.3x 2.6x 13.0x 11.2x 9.1x 8.0x 3.1x 6.6%
Source: Company filings, Wall Street research, Factset as of 03/10/23
10 |
| Fiber - operating metrics
Source: Company filings, Wall Street research, Factset as of 03/10/23
Revenue growth EBITDA growth CAGR (2022E - 2024E) EBITDA margin Capex as % Capex as % Cash
($mm USD) CY2023E CY2024E CY2023E CY2024E Revenue EBITDA CY2023E CY2024E of revenue of EBITDA conversion
Cable
Altice (3.9%) (1.7%) (7.0%) 0.9% (2.8%) (3.1%) 36.9% 37.8% 19.1% 51.8% 48.2%
Charter 2.2% 2.9% 2.4% 4.0% 2.5% 3.2% 39.2% 39.6% 19.3% 49.2% 50.8%
Cable One (2.0%) (0.5%) 2.3% 2.1% (1.2%) 2.2% 54.5% 55.9% 24.0% 44.1% 55.9%
Comcast (0.8%) 3.0% 3.0% 4.8% 1.0% 3.8% 31.2% 31.7% 10.4% 33.4% 66.6%
WideOpenWest (0.4%) 1.0% 2.7% 7.4% 0.3% 5.1% 37.7% 40.2% 32.1% 85.0% 15.0%
Mean (1.0%) 0.9% 0.7% 3.8% (0.0%) 2.2% 39.9% 41.0% 21.0% 52.7% 47.3%
Median (0.8%) 1.0% 2.4% 4.0% 0.3% 3.2% 37.7% 39.6% 19.3% 49.2% 50.8%
FttH Upgrade
Shentel 6.1% 15.9% 4.4% 42.6% 10.9% 22.0% 24.5% 30.2% 95.4% NM NM
Consolidated Communications (4.0%) 0.7% (16.7%) 10.0% (1.7%) (4.2%) 27.2% 29.8% 43.3% NM NM
Frontier (0.7%) 1.2% 1.9% 4.1% 0.3% 3.0% 35.4% 36.4% 48.8% NM NM
Lumen (5.2%) (3.6%) (14.2%) (3.6%) (4.4%) (9.1%) 31.8% 31.8% 20.5% 64.4% 35.6%
Mean (0.9%) 3.5% (6.1%) 13.3% 1.3% 2.9% 29.7% 32.1% 52.0% 64.4% 35.6%
Median (2.3%) 0.9% (6.1%) 7.1% (0.7%) (0.6%) 29.5% 31.0% 46.0% 64.4% 35.6%
Wireless (for reference only)
T-Mobile 1.8% 3.3% 10.6% 8.6% 2.5% 9.6% 35.3% 37.1% 12.1% 34.2% 65.8%
AT&T 1.5% 1.3% 3.7% 2.4% 1.4% 3.0% 35.1% 35.5% 17.7% 50.5% 49.5%
Verizon 0.7% 1.1% 0.1% 1.7% 0.9% 0.9% 34.8% 35.0% 13.7% 39.5% 60.5%
Mean 1.3% 1.9% 4.8% 4.2% 1.6% 4.5% 35.0% 35.8% 14.5% 41.4% 58.6%
Median 1.5% 1.3% 3.7% 2.4% 1.4% 3.0% 35.1% 35.5% 13.7% 39.5% 60.5%
11 |
| Consolidated capitalization and trading levels
Recent TLB trading levels (Price) Recent secured notes trading levels (YTW)
Capitalization as of 12/31/22
1 Calculation includes cash and cash equivalents and short-term investments
2 Yield on Term Loan B shown as Simple Yield calculated to a 4-year takeout assumption, Yield on secured notes shown as YTW
3 Tax adjusted for 21% marginal tax rate on notional amount
4 Net Debt calculation utilizes $50mm cash netting cap
As of 12/31/22 As of 3/10/23 Next Call
($mm) Ratings Coupon Floor Maturity Amount LTM Adj.
EBITDA Price Yield YTW Date Date Price
Cash & cash equivalents1 Corp: B3 / B- (Stable / Stable) $414
$250mm RCF B3 / B- S + 400 0.00% Oct-27 -
Term loan B2 B3 / B- L + 350 0.75% Oct-27 1,000 80.875 13.42%
Senior secured notes2 B3 / B- 6.500% - Oct-28 750 70.500 14.39% Oct-28 Oct-23 104.875
Senior secured notes2 B3 / B- 5.000% - Oct-28 400 67.000 13.68% Oct-28 Oct-23 103.750
Unfunded pension liabilities3
98
Finance leases 36
Total Debt $2,283 5.9x
Net Debt4
$2,233 5.8x
SCP Preferred Equity 477
Total Debt + Preferred $2,760 7.2x
Net Debt + Preferred $2,710 7.1x
Market cap as of 3/10/23 310
Total capitalization $3,070 8.0x
LTM 12/31/2022 Adj. EBITDA $384
$78.00
$82.00
$86.00
$90.00
$94.00
$98.00
Jan-22 Mar-22 May-22 Jul-22 Aug-22 Oct-22 Dec-22 Feb-23
JPM LL Index CNSL TLB
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Jan-22 Mar-22 May-22 Aug-22 Oct-22 Dec-22 Feb-23
JPM HY Index 6.50% Notes 5.00% Notes
80.875
94.375
14.39%
9.62%
13.68%
12 |
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Disclaimer |
Exhibit (d)(iii)
INTERIM INVESTORS’ AGREEMENT
INTERIM INVESTORS’ AGREEMENT (this “Agreement”),
dated as of October 15, 2023, by and among Condor Holdings LLC, a Delaware limited liability company (“Parent”),
Condor Merger Sub Inc., a Delaware corporation (“Merger Sub”), Searchlight Capital III, L.P. and Searchlight Capital
III PV, L.P. (each, an “SCP Investor” and collectively, “SCP”) and British Columbia Investment Management
Corporation, a corporation incorporated pursuant to the Public Sector Pension Plans Act (British Columbia) (“BCI”).
Each of SCP and BCI shall be referred to herein as an “Investor” and, collectively, as the “Investors”.
Capitalized terms used but not defined herein shall have the meanings assigned to them in the Merger Agreement (as defined below).
RECITALS
WHEREAS, Searchlight III CVL, L.P. (“Holdco”)
is the sole member of Parent, and Merger Sub is a direct wholly owned Subsidiary of Parent;
WHEREAS, pursuant to that certain Agreement and
Plan of Merger, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Merger
Agreement”), by and among Parent, Merger Sub and Consolidated Communications Holdings, Inc., a Delaware corporation (the
“Company”), Merger Sub will merge with and into the Company with the Company surviving the Merger as a wholly owned
subsidiary of Holdco;
WHEREAS, each Investor has, on the date hereof,
executed an equity commitment letter in the form attached hereto as Exhibit A-1 (the “SCP Equity Commitment Letter”)
or Exhibit A-2 (the “BCI Equity Commitment Letter” and, together with the SCP Equity Commitment Letter,
the “Equity Commitment Letters”), as applicable, in which each such Investor has committed, subject to the terms and
conditions set forth therein, to purchase, or to cause one or more of its permitted assignees to purchase, directly or indirectly, equity
interests in Parent at the Closing up to the applicable aggregate amount set forth therein;
WHEREAS, each Investor has, on the date hereof,
executed a limited guaranty in the form attached hereto as Exhibit B-1 or Exhibit B-2 (collectively, the “Limited
Guaranties”), as applicable, in which each such Investor has committed, subject to the terms and conditions set forth therein,
to guarantee to the Company certain payment obligations of Parent and Merger Sub to the Company under the Merger Agreement up to the applicable
aggregate amount as set forth therein; and
WHEREAS, the Investors wish to agree upon certain
terms and conditions that will govern the actions and the relationship among the Investors, Holdco, Parent and Merger Sub with respect
to the Transactions, the Merger Agreement, the Equity Commitment Letters and the Limited Guarantees (each, a “Transaction Agreement”
and the transactions contemplated thereby, collectively, the “Transactions”), and the transactions contemplated hereby
and thereby or to be undertaken in connection therewith.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as
follows:
| 1. | EFFECTIVENESS; DEFINITIONS. |
1.1 Effectiveness.
This Agreement shall become effective on the date hereof and shall terminate upon the earlier of, (i) except with respect to Section 2.2
(Failing Investors), Section 2.3 (Substitution), the last sentence of Section 2.5 (Pre-Closing
Structuring; Holdco Governance Agreements), Section 2.7.1 (Expenses), and Section 3 (Miscellaneous),
the Closing, and (ii) except with respect to Sections 2.1.1 (SCP Determinations), 2.2 (Failing Investors),
2.3 (Substitution), 2.6.2 (Expense Reimbursement), 2.7.2 (Expenses), 2.11 (Contribution
With Respect to Limited Guaranties), and 3 (Miscellaneous) (other than Section 3.14), the termination of the Merger
Agreement; provided that any liability for failure to comply with the terms of this Agreement prior to the termination of this
Agreement shall survive such termination.
1.2 Definitions.
1.2.1 “Affiliate”
means, (a) with respect to any Person, an “affiliate” of such Person within the meaning of Rule 405 promulgated
under the United States Securities Act of 1933, as amended, and (b) with respect to BCI, shall also include its clients and their
Affiliates for which BCI acts as an agent for investment; provided that the Company and its subsidiaries shall not be deemed Affiliates
of any party hereto.
1.2.2 “Commitment”
means, with respect to any SCP Investor, the applicable Investor Commitment in respect of such SCP Investor (as defined in the SCP Equity
Commitment Letter, disregarding for this purpose the potential reduction in the Aggregate Commitment contemplated thereby) and, with respect
BCI, the Aggregate Commitment (as defined in the BCI Equity Commitment Letter, disregarding for this purpose the potential reduction in
the Aggregate Commitment contemplated thereby).
1.2.3 “Commitment
Percentage” means, with respect to each Investor, the percentage equal to such Investor’s Commitment divided by the sum
of the total Commitment of all Investors, as such percentage may be modified from time to time in accordance with the terms of this Agreement.
1.2.4 “Transfer”
means any sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition. A sale, transfer, conveyance,
assignment, pledge, encumbrance, hypothecation or other disposition of (a) a controlling interest in any Investor, in each case directly
or through the sale, transfer, conveyance, assignment, pledge, encumbrance, hypothecation or other disposition of a controlling interest,
whether through a stock sale or otherwise, in any ultimate or intermediate parent entity of such Investor, and (b) any interest in
Holdco held by an Investor shall, in each case, constitute a “Transfer” by Holdco of any of its equity or other interest of
Parent or Merger Sub for purposes of this Agreement.
| 2. | AGREEMENTS AMONG THE PARTIES. |
2.1 Pre-Closing
Decisions.
2.1.1 SCP
Determinations. Subject to Section 2.1.2, all decisions to be made by any of Parent or Merger Sub in connection with the
Merger Agreement and any related agreements, the Transaction Agreements and the Transactions prior to the Closing including any amendments
or waivers under the Merger Agreement and any determination as to whether the conditions to closing under the Merger Agreement are satisfied
shall be determined by SCP in good faith; provided that, without the consent of BCI, (v) the Merger Agreement shall not be
amended (i) in a manner that is materially and disproportionately adverse to BCI relative to SCP, (ii) to increase, or
change the form of, the Merger Consideration payable thereunder, (iii) to increase, or change the form of, the maximum amount of
damages, or any other fees or expenses payable in any material amounts, in each case, payable by Parent and Merger Sub thereunder, or
(iv) to modify any limitations on liability of Parent or Merger Sub or otherwise impose additional liability on any Affiliates of
Parent or Merger Sub or the Guarantors or Affiliates thereof (including any increase or modification to the obligations of the Guarantors
under the Equity Commitment Letters and Limited Guaranties), (w) no amendment shall be made to Section 5.5 of the Merger Agreement,
(x) no amendment or waiver shall be made with respect to any closing conditions under the Merger Agreement, (y) in the event
any new debt financing is required to consummate the Transactions, no agreement may be entered into with respect thereto, and (z) there
shall be no settlement by Parent or Merger Sub of any litigation, arbitration or similar proceeding arising in connection with the Transactions
if (1) BCI (or any of its Affiliates) is named in the litigation or proceeding, unless BCI (and such Affiliates) (i) receives
a full and unconditional release from all claims in such litigation or proceeding, and (ii) is not required to contribute financially
to any such settlement (except as required to fund its portion of any damages pursuant to its Limited Guaranty) or (2) any such settlement
involves any admission of wrongdoing by any Investor, Parent, Merger Sub, or any of their respective Affiliates (each of the actions listed
in this proviso being an “Adverse Change”). BCI shall be required to fund concurrently with (A) SCP, pursuant
to the terms of the Equity Commitment Letters and (B) the consummation of the Transactions. Without limiting the foregoing or Section 2.1.2
hereof, SCP shall (i) use reasonable efforts to keep each Investor informed regarding all material discussions and negotiations engaged
in by Parent and Merger Sub with respect to the Transaction Agreements, (ii) promptly deliver to each Investor any notices delivered
to Parent and Merger Sub pursuant to the Transaction Agreements and (iii) consult with BCI (A) in connection with negotiating
or entering into, or causing Parent or Merger Sub to negotiate or enter into, any agreements with any current or prospective members of
management of the Company with respect to the terms of such management’s employment, compensation and equity incentives at Closing
and following the Closing, (B) in connection with any amendment or waiver of any covenant or agreement in the Merger Agreement, (C) in
connection with any action or decision by Parent pursuant to Section 5.5(e) of the Merger Agreement, (D) prior to terminating
the Merger Agreement and (E) in connection with any litigation arising in connection with the Transactions (including the initiation,
direction, control or settlement thereof); provided, that if BCI is a Failing Investor (as defined below) and there is a Non-Funding
Event (as defined below) such that BCI would be responsible for 100% of any damages award, settlement payment, expense reimbursement or
other payment or expense or loss as set forth under Section 2.2 below, BCI shall have the right to initiate, direct, control
and settle any litigation arising in connection with such Non-Funding Event, subject to consultation with SCP in connection therewith.
2.1.2 Request
for Consent for an Adverse Change. In the event that Parent and Merger Sub desire to make an Adverse Change, they shall provide prior
written notice thereof to BCI. BCI shall have 5 Business Days’ following receipt thereof to inform Parent and Merger Sub in writing
if they consent to such Adverse Change; provided, that if BCI does not object to such Adverse Change in writing in such 5 Business
Day period, BCI shall be deemed to have not consented to such Adverse Change.
2.2 Failing
Investors. If either Investor fails to fund its Commitment when required under the applicable Equity Commitment Letter or asserts
in writing its unwillingness to do so, and as a result of such actions taken (or failed to be taken) by such Investors (such Investors,
the “Failing Investors” and the Investors who are not Failing Investors, the “Non-Failing Investors”)
all or any portion of any damages award or settlement payment, expense reimbursement or other payment is required by Parent, Merger Sub,
any other Investor or any of their respective Affiliates (including as a result of any obligation by Parent, Merger Sub or any Investor
to make such a payment under the Merger Agreement or pursuant to any Limited Guaranty) (such payments, collectively, the “Reverse
Termination Payments”), the Reverse Termination Payment (along with any other losses and any other reasonable and documented
expenses (excluding, for the avoidance of doubt, any success or contingency fees) incurred by Parent, Merger Sub, the other Investors
or any of their respective Affiliates) shall be paid 100% by such Failing Investors on a pro rata basis. For the avoidance of doubt,
if SCP determines, in good faith and following reasonable consultation with BCI, that the closing conditions under the Merger Agreement
have not been satisfied or that Parent and Merger Sub will not consummate the transactions contemplated by the Merger Agreement, the
Investors shall remain fully responsible under their respective Equity Commitment Letters and Limited Guaranties in accordance with the
terms thereof.
2.3 Substitution.
Notwithstanding anything to the contrary in this Agreement, if (a) BCI is a Failing Investor, (b) SCP determines to waive any
unsatisfied closing conditions under Sections 6.1 and 6.3 of the Merger Agreement and proceed with the consummation of the Transactions
but BCI is not willing to waive such closing conditions or (c) the Investors do not jointly determine, each acting in good faith,
that the closing conditions under Sections 6.1 and 6.3 of the Merger Agreement have been satisfied, then SCP shall have the right to replace
BCI as an Investor hereunder and terminate its participation in the Equity Financing (after which BCI shall no longer have any of the
benefits pursuant to this Agreement) by arranging to fund BCI’s Commitment itself and/or through one or more of its Affiliates or
other investors (a “Substitution”), whereupon (i) this Agreement will terminate with no further force or effect
(except with respect to this Section 2.3 (Substitution), Section 3 (Miscellaneous) (other than Section 3.14)
and, if clause (a) applies, Section 2.2 (Failing Investor)); provided that any liability for failure to comply
with the terms of this Agreement prior to the termination of this Agreement shall survive such termination, and (ii) BCI shall, in
the case of the foregoing clauses (b) and (c) (but not if clause (a) applies), receive a full and unconditional release
of its obligations under this Agreement and its Equity Commitment Letter and Limited Guaranty (other than, in each case, liability arising
from its failure to comply with this Agreement prior to the date of such release but for the avoidance of doubt, BCI shall not be a Failing
Investor in such circumstances). For the avoidance of doubt, in the event of a Substitution, BCI shall be responsible for its separate
fees and expenses incurred in connection with the Transactions.
2.4 Equity
Commitments.
2.4.1 Each
Investor undertakes (in favor of the other Investors) to comply with its and their respective obligations under their respective Equity
Commitment Letters and, for the avoidance of doubt without limiting the Company’s third-party beneficiary rights thereunder, that
Parent shall have no right to enforce any of the Equity Commitment Letters, and shall not attempt to do so, except in accordance with
their respective terms and conditions, and ratably among the Investors.
2.4.2 The
commitments made by the Investors and, to the extent assigned to an Affiliate in compliance with the relevant Equity Commitment Letter
and this Agreement, their Affiliates pursuant to the Equity Commitment Letters shall be used by Parent to fund the amounts due at the
Closing pursuant to Section 2.2 of the Merger Agreement or to pay for any costs, fees or expenses arising from the Transactions,
and for no other purpose. Other than in connection with the establishment of a management incentive plan in accordance with the LLCA,
all limited liability company interests or other equity securities of Holdco issued in connection with the Closing shall be issued only
to the Investors (or their respective Affiliates, as designated by such Investors in compliance with this Agreement and their respective
Equity Commitment Letters) pro rata (for the avoidance of doubt, other than such interests issued in respect of the limited partnership
interests of Holdco in connection with the conversion thereof from a limited partnership to a limited liability company in accordance
with the Steps Plan (as defined below)) in accordance with each Investor’s Commitment (as such commitment amount may be adjusted
from time to time as additional persons become Investors hereunder and in compliance with the applicable Equity Commitment Letter).
2.4.3 In
the event any of the Investors or any of their Affiliates fund any monies directly or indirectly to Parent prior to the Closing (a “Pre-Closing
Funding”), the other Investors acknowledge and agree that the Pre-Closing Funding shall be used by Parent solely to fund the
amounts due at Closing pursuant to Section 2.2 of the Merger Agreement and, if the Closing does not occur within five (5) Business
Days after the date of such Pre-Closing Funding, the Investors agree to cause Parent to promptly return all such amounts to the relevant
Investor or as such Investor directs.
2.4.4 If
Parent determines that it does not require all of the Commitments in order to satisfy its obligations in full under the Merger Agreement
and to consummate the Transactions or otherwise, then Parent may reduce the aggregate amount of Commitments funded at the Closing to such
extent, with any such reduction to be applied to each Investor on a pro rata basis, and each Investor hereby agrees to such reduction.
For the avoidance of doubt, the pro rata reduction of each Investor shall be based on such Investor’s Commitment prior to any syndication
as contemplated by this Agreement. The parties hereto agree that they shall not amend their respective Equity Commitment Letters or Limited
Guaranties unless such amendment applies to all of the Investors on a non-discriminatory basis.
2.5 Pre-Closing
Structuring; Holdco Governance Agreements. Prior to Closing, the Investors will take actions to implement the closing transaction
structure in accordance with the steps plan prepared by PricewaterhouseCoopers LLP dated as of October 12, 2023 and attached in substantially
the form hereto as Exhibit C (with such changes as the Investors, acting reasonably, may agree (it being agreed and understood
that each Investor shall consider in good faith any changes proposed by another Investor) (the “Steps Plan”). Unless
otherwise agreed by the Investors, prior to the Closing, the Investors will not permit Parent, Merger Sub or Holdco or any of their respective
subsidiaries (including any entities in the structure between Holdco and Parent) to conduct any business or activities that are inconsistent
with the Steps Plan or (except for activities of Holdco relating to its existing investment in the Company) unrelated to the Transaction.
Holdco will be governed by a customary limited liability company agreement to be entered into by the Investors (in the case of SCP, directly
or indirectly through SCP-controlled vehicles, and in the case of BCI, directly or indirectly through BCI-controlled vehicles) at or prior
to the Closing (the “LLCA”) in connection with the conversion of Holdco from a Delaware limited partnership to a Delaware
limited liability company, which conversion shall occur at least one day prior to the Effective Time. The LLCA shall not contain any terms
that would be inconsistent with, or conflict with, any of the terms set forth in the term sheet attached hereto as Exhibit D.
SCP and BCI shall to use reasonable efforts to agree on the terms of and execute the LLCA at or prior to the Closing. If, for any reason,
the LLCA is not agreed and executed at or prior to Closing, SCP and BCI shall to use reasonable efforts to agree the LLCA as soon as reasonably
practicable after the Closing and during such period after Closing, the terms of Exhibit D (including without limitation the
“Capital Contribution” section) shall be binding on the Investors and shall form the legal basis of their ongoing relationship
as equity holders of Holdco.
2.6 Expense
Reimbursement.
2.6.1 The
Investors agree to negotiate in good faith and enter into a transaction fee arrangement with Holdco, Parent, Merger Sub, the Company and/or
any of their respective subsidiaries (if applicable) on the terms set forth on Exhibit E hereto. No other transaction, success
or similar fee shall be paid or payable by Holdco, Parent, Merger Sub or the Company and/or any of their respective subsidiaries (if applicable)
to an Investor or its Affiliates without the prior written consent of the other Investors.
2.6.2 Each
Investor agrees that any expense reimbursement to be paid by the Company to the Investors and/or Parent and Merger Sub under the Merger
Agreement, and any other damages, costs, fees and expenses to be paid to the Investors, and/or Parent and Merger Sub under or with respect
to the Merger Agreement or the transactions contemplated thereby (collectively, the “Company Payments”), shall (a) first
be used to pay the damages, costs, fees and expenses of the persons to whom Transaction Expenses are owed in their capacity as such on
a pro rata basis with respect to the Transaction Expenses incurred and (b) thereafter be paid to the Investors in proportion to their
respective Commitment Percentages at the time of the event that triggered payment of any of the Company Payments. If requested by an Investor,
the other Investors will reasonably cooperate to structure the receipt of any such Company Payments or the Transaction Fee by the requesting
Investor in a tax-efficient manner (including, but not limited to, by assigning such Investor’s share of the Transaction Fee to
an Affiliate of such Investor).
2.7 Expenses.
2.7.1 In
the event the Transactions are consummated, the Company, Holdco and/or Parent shall bear and pay all reasonable and documented fees and
expenses in connection with the transactions contemplated by the Merger Agreement and any out-of-pocket expenses incurred by the Investors
(including the costs of their third party advisors) in connection with the other Transactions (the “Transaction Expenses”).
2.7.2 In
the event that the Transactions are not consummated, after the application pursuant to Section 2.6 (Expense Reimbursement)
of any Company Payments, each Investor shall bear and pay, on a several and not joint basis, its pro rata share (based on its respective
Commitment Percentage) of any Transaction Expenses incurred following the execution of the Merger Agreement.
2.8 [RESERVED]
2.9 Regulatory
Matters; Efforts. Each Investor shall use its reasonable best efforts to supply and provide all information (which information shall
be true, accurate and complete in all material respects) required in connection with any filings or notifications made to or with any
Governmental Entity in connection with the Transactions, the Transaction Agreements and the transactions contemplated thereby and shall
use its reasonable best efforts to make such filings and take such other actions as are required and are within such party’s possession
and control to cause Parent and Merger Sub to comply with Section 5.5 of the Merger Agreement. Each Investor shall use its reasonable
best efforts to respond in a prompt manner to any reasonable requests from any Governmental Entity (including by providing information
requested by Parent, Merger Sub, or the Company in order to respond to such requests made by a Governmental Entity to Parent, Merger
Sub, or the Company) in connection with or in response to any such filings or notifications. Notwithstanding anything to the contrary
in this Section 2.9, (a) any disclosure of such information shall be done in a manner consistent with applicable law,
(b) any Investor may, as it deems advisable or necessary after consultation with its legal advisor, reasonably designate any competitively
sensitive information as for “outside counsel only,” (c) materials provided to an Investor or its counsel may be redacted
to remove references concerning the valuation for the Transactions and (d) no Investor shall be obligated to provide to any other
Investor any sensitive personal identifying information submitted or to be submitted to any Governmental Entity. SCP shall keep BCI informed
of any communication (whether written or oral) with any such Governmental Entity regarding the Transactions and shall provide BCI with
draft copies in advance (or, in the case of oral communications, advise BCI of the intended contents) of any such communication regarding
the Transactions to any such Governmental Entity (excluding any filing made under the HSR Act, other Antitrust Laws, the Communications
Laws or the DPA), provided, in the case of any such communication in response to a request from the applicable Governmental Entity, SCP
shall use reasonable efforts to so inform BCI in advance thereof and if it is unable to do so shall inform BCI promptly thereafter, provided,
further, that this sentence shall only apply to communications that are material to the process of obtaining the requisite approval of
such Governmental Entity in connection with the Transactions or that involve information relating to BCI. SCP shall keep BCI reasonably
informed as to the status of the pursuit of the relevant approval from such Governmental Entity (it being agreed that SCP shall not be
required to provide any information that is subject to confidentiality restrictions or is referred to in the preceding sentence). BCI
will not have any communication relating to the Transactions with any Governmental Entity whose approval is required in connection with
the Transactions without the prior written consent of SCP, such consent not to be unreasonably withheld; provided, that BCI may respond
to a request from the applicable Governmental Entity so long as BCI first informs SCP of such request and any proposed communication
(whether written or oral) in response thereto, provides SCP with draft copies in advance (or, in the case of oral communications, advises
SCP of the intended contents) of any such communication, consults with SCP prior to engaging in any such communication, and provides
SCP with a reasonable opportunity to participate in any discussions with such Governmental Entity (and if SCP does not participate, informs
SCP of any communications with such Governmental Entity in connection therewith), and any such communication is limited to information
relating to BCI. Notwithstanding anything to the contrary herein, nothing herein shall require an Investor or any of its Affiliates (other
than Parent and Merger Sub) to take any action, including for the avoidance of doubt, any divestiture, litigation or similar actions
or limitations, in connection with obtaining any Governmental Entity clearance required for the consummation of the Transactions other
than providing the information and making filings pursuant to this Section 2.9 and responding to any reasonable requests
for information from Parent, Merger Sub or the Company that may be required in connection with any filings with any Governmental Entity.
2.10 Press
Release; Communications. Any press release or other public announcement or communication relating to this Agreement or the Transactions
shall be made only at such times and in such manner as may be agreed upon in writing by Investors; provided, that the Investors
shall be entitled to issue such press releases and to make such public statements as are required by applicable Law, in which case, to
the extent permitted by applicable Law, the other Investors shall be advised in advance thereof and the parties shall use their commercially
reasonable efforts to cause a mutually agreeable release or announcement to be issued. If such press release or other public announcement
is required by law by an Investor and contains any reference to any other Investor’ or such other Investor’s Affiliates, such
first Investor shall (unless prohibited by law) provide the other Investors with advance notice of such press release or other public
communication and give such other party a reasonable opportunity to comment thereon prior to its release.
2.11 Contribution
With Respect to Limited Guaranties. Subject to Section 2.2, each Investor agrees to contribute to the amount paid or payable
by the other Investors in respect of the Limited Guaranties so that each Investor will have paid an amount equal to its Commitment Percentage
of the aggregate amount paid under all of the Limited Guaranties, it being understood that no Investor shall be obligated to pay an amount
pursuant to its own Limited Guaranty and this Section 2.11 that, in the aggregate, exceeds the applicable maximum amount it
is obligated to pay pursuant to its own Limited Guaranty unless such Investor is a Failing Investor (in which case such Failing Investor
shall be subject to the additional liabilities and subject to the terms and limitations set forth herein). For the avoidance of doubt,
subject to Section 2.2, no Investor shall be liable for any amounts under this Agreement and the Limited Guaranty in excess
of its applicable Maximum Aggregate Amount or Maximum Guarantor Amount (each as defined in the applicable Limited Guaranty, and for the
avoidance of doubt, including all amounts paid on behalf of Parent and Merger Sub to the Company in accordance with the terms of the Merger
Agreement and whether or not any amounts are actually payable under the applicable Limited Guaranty).
2.12 Restrictions
on Transfer. For so long as this Agreement shall be in force or remain in effect, no Investor shall (a) permit Holdco to Transfer
any of its equity or other interest of Parent or Merger Sub to any person or permit Parent, Merger Sub or Holdco or any of their respective
subsidiaries (including any entities in the structure between Holdco and Parent) to issue any equity interests to any person, in each
case, other than in accordance with this Agreement or, in the case of Merger Sub, to the Company in accordance with the Merger Agreement
or, in the case of Holdco, in accordance with its limited partnership agreement or (b) Transfer any of its Commitment, except in
the case of clause (b), to such Investor’s Affiliates to the extent permitted by the Equity Commitment Letters; provided,
that such assigning Investor shall remain obligated to perform its obligations hereunder to the extent not performed by such assignee;
provided, further that SCP shall be entitled to syndicate a portion of its equity to limited partners in co-investment funds
managed and controlled by SCP or its Affiliates so long as at least 17.647% of the Commitment funded by the SCP Investors at Closing is
funded by funds provided by Searchlight Capital III, L.P. and Searchlight Capital III PV, L.P., or any alternative investment vehicles
formed by Searchlight Capital Partners III GP, L.P.
2.13 Representations,
Warranties and Covenants of Each Investor. Each Investor hereby represents and warrants, severally and not jointly, as of the date
hereof and as of the Closing Date, that:
2.13.1 (i) As
of the date hereof, such Investor has, and at the Closing will have, sufficient cash, available lines of credit or other sources of immediately
available funds to fulfill its Commitment, (ii) the execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate or other organizational action by such Investor and (if such Investor is an entity) do not contravene any provision
of such Investor’s charter, partnership agreement, operating agreement or similar organizational documents or any Law or contractual
restriction binding on such Investor or its assets, and this Agreement has been duly executed and delivered by such Investor, (iii) all
consents, approvals, authorizations, permits of, filings with and notifications to, any Governmental Entity necessary for the due execution,
delivery and performance of this Agreement by such Investor (other than those contemplated by the Merger Agreement with respect to the
Transactions contemplated thereby) have been obtained or made and all conditions thereof have been duly complied with, and no other action
by, and no notice to or filing with, any Governmental Entity is required in connection with the execution, delivery or performance of
this Agreement, and (iv) this Agreement constitutes a legal, valid and binding obligation of such Investor, enforceable against such
Investor in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Laws relating to or affecting creditors’ rights generally, or by general principles
of equity).
2.13.2 Such
Investor has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits
and risks of acquiring equity interests in Parent and Merger Sub, including the risk that such Investor could lose the entire value of
such equity interests, and has so evaluated the merits and risks of such purchase. Such Investor has been given access to the kind of
information and the documents concerning Parent and Merger Sub and the Company, and to ask questions of, and to receive answers from,
Parent regarding the Company and its subsidiaries (in each case, to the extent Parent possesses such information). Such Investor has received
all information which it believes to be necessary in order to reach an informed decision as to the advisability of acquiring equity interests
in Parent and Merger Sub and has had answered to such Investor’s reasonable satisfaction any and all questions regarding such information.
Such Investor has made such independent investigation of Parent and Merger Sub, the Company, each of their management, and related matters
as such Investor deems to be necessary or advisable in connection with the acquisition of equity interests in Parent and Merger Sub, and
is able to bear the economic and financial risk of acquiring equity interests in Parent and Merger Sub (including the risk that such Investor
could lose the entire value of such equity interests). Such Investor did not make a decision to acquire equity interests in Parent and
Merger Sub as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine
or similar media or broadcast over television or radio, any seminar or meeting, or any general solicitation of a subscription of equity
interests in Parent and Merger Sub by a person not previously known to such Investor. Such Investor acknowledges that none of Parent and
Merger Sub nor any of their Affiliates has rendered or will render any securities valuation advice or other advice to such Investor, and
such Investor is not agreeing to purchase equity interests in Parent and Merger Sub in reliance upon, or with the expectation of, any
such advice.
2.13.3 Each
Investor specifically understands and agrees that no Investor has made or will make any representation or warranty with respect to the
terms, value or any other aspect of the transactions contemplated hereby, and each Investor explicitly disclaims any warranty, express
or implied, with respect to such matters. In addition, each Investor specifically acknowledges, represents and warrants that it is not
relying on any other Investor (a) for its due diligence concerning, or evaluation of, Parent, Merger Sub, the Company or their respective
assets or businesses, (b) for its decision with respect to making any investment contemplated hereby or (c) with respect to
tax and other economic considerations involved in such investment.
2.14 Closing
Date Notification. Parent will use its reasonable efforts to provide each Investor with at least ten (10) Business Days prior
notice of the Closing Date.
3.1 Amendment.
This Agreement may be amended or modified, and the provisions hereof waived, only by an agreement in writing signed by SCP and BCI. Notwithstanding
anything to the contrary herein, any admittance of any additional investor in accordance with the terms of this Agreement and any other
agreements between the applicable parties shall not require the consent of any party hereto.
3.2 Severability.
In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision shall be
construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable
law. The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect,
it shall not invalidate, render unenforceable or otherwise affect any other provision hereof.
3.3 Notice.
All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) four Business Days after
being sent by registered or certified mail, return receipt requested, postage prepaid, (ii) one Business Day after being sent for
next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier service, or (iii) on the date of confirmation
of receipt (or, the first Business Day following such receipt if the date of such receipt is not a Business Day) of transmission by email,
in each case to the intended recipient as set forth below:
if to Parent:
c/o Searchlight Capital Partners, L.P.
745 5th Avenue, 27th Floor
New York, NY 10151
| Attention: | Nadir Nurmohamed |
Timothy Austin
| Email: | nnurmohamed@searchlightcap.com |
taustin@searchlightcap.com
with a copy (which shall not constitute notice)
to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
| Attention: | Steven A. Cohen |
Victor Goldfeld
VGoldfeld@wlrk.com
if to any Investor, to the applicable notice address set
forth in such Investor’s Equity Commitment Letter.
3.4 Governing
Law; Jurisdiction; Venue; Waiver of Jury Trial.
3.4.1 This
Agreement, and all matters, claims or causes of action (whether in contract or tort) based upon, arising out of or relating to this Agreement
or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the laws of the
State of Delaware.
3.4.2 Each
party irrevocably and unconditionally submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if
the Court of Chancery of the State of Delaware declines to accept jurisdiction over any suit, action or other Proceeding, any state or
federal court within the State of Delaware), for the purposes of any suit, action or other Proceeding related to or arising out of this
Agreement or the transactions contemplated hereby, and irrevocably and unconditionally waives any objection to the laying of venue of
any such suit, action or Proceeding in any such court, and further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such suit, action or Proceeding has been brought in an inconvenient forum. Each party agrees that service of
any process, summons, notice or document by registered mail to such party’s respective address set forth in Section 3.3
(Notices) shall be effective service of process for any such suit, action or Proceeding.
3.4.3 EACH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY SUIT, ACTION OR OTHER PROCEEDING RELATED
TO OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS.
3.5 Specific
Performance. The parties agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to equitable
relief, including in the form of an injunction or injunctions, to prevent breaches of this Agreement and to enforce specifically the terms
and provisions of this Agreement in an appropriate court of competent jurisdiction as set forth in Section 3.4 (Governing
Law; Jurisdiction; Venue; Waiver of Jury Trial), this being in addition to any other remedy to which any party is entitled at Law
or in equity. The right to specific enforcement shall include the right of a party hereto to cause the other parties hereto to cause the
transactions contemplated hereby to be consummated on the terms and subject to the conditions set forth in this Agreement and to cause
each Investor’s Commitment to be funded on the terms and subject to the conditions set forth in such Investor’s Equity Commitment
Letter. The parties hereto further agree (a) to waive any requirement for the security or posting of any bond in connection with
any such equitable remedy, and (b) not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to applicable
Law or inequitable for any reason, or to assert that a remedy of monetary damages would provide an adequate remedy; provided that
nothing contained in this clause (b) shall prohibit a party from opposing a grant of specific performance or other equitable
relief on the basis that the party is not in breach of this Agreement or that such remedy is not permitted pursuant to the terms of this
Agreement. The parties acknowledge and agree that the right of specific enforcement is an integral part of the transactions contemplated
by this Agreement and without that right, the parties hereto would not have entered into this Agreement.
3.6 No
Recourse. Notwithstanding anything that may be expressed or implied in this Agreement or any Transaction Agreement, each party hereto
unconditionally and irrevocably covenants, agrees and acknowledges that no Person other than the Investors shall have any obligation or
liability hereunder (on the terms and subject to the conditions set forth herein), and that notwithstanding that each Investor is a partnership,
limited partnership or limited liability company (i) no right or remedy, recourse or recovery (whether at law or equity or in tort,
contract or otherwise) hereunder, under this Agreement or any Transaction Agreement or in connection with the transactions contemplated
hereby or thereby (or the termination or abandonment thereof) or otherwise, or in respect of any written or oral representations made
or alleged to be made in connection herewith or therewith, shall be had against any former, current or future direct or indirect equity
holder, controlling person, general or limited partner, officer, director, employee, investment professional, manager, stockholder, client,
member, agent, Affiliate, assignee, financing source or Representative of any of the foregoing or any of their respective successors or
assigns (other than Parent under the Merger Agreement and subject to the terms and conditions set forth therein) (any such Person, a “Related
Party”) of any Investor or any Related Party of any Related Party (including, without limitation, any liabilities or obligations
arising under, or in connection with, this Agreement, any Transaction Agreement or the transactions contemplated hereby or thereby (or
the termination or abandonment thereof) or otherwise, or in respect of any written or oral representations made or alleged to be made
in connection herewith or therewith, or in respect of any claim (whether at law or equity or in tort, contract or otherwise), whether,
in each case, by or through piercing of the corporate, limited liability company or limited partnership veil or similar action, by or
through a claim by or on behalf of any Investor against any Related Party of an Investor or any Related Party of such Related Party, whether
by the enforcement of any judgment or assessment or by any legal or equitable proceedings, or by virtue of any statute, regulation or
other applicable Law or otherwise, and (ii) it is expressly agreed and acknowledged that no personal liability or obligation whatsoever
shall attach to, be imposed on, or otherwise be incurred by any Related Party of any Investor or any Related Party of such Related Party
for any liabilities or obligations of the Investors under this Agreement, any Transaction Agreement or in connection with the transactions
contemplated hereby or thereby (or the termination or abandonment thereof) or otherwise, in respect of any written or oral representation
made or alleged to have been made in connection herewith or therewith or for any claim (whether at law or equity or in tort, contract
or otherwise) based on, in respect of, in connection with, or by reason of such obligations or their creation, and each party hereto hereby
irrevocably and unconditionally waives and irrevocably and unconditionally releases all claims (whether arising under equity, contract,
tort or otherwise) against such Persons for any such liability or obligation. For the avoidance of doubt, no Investor nor any of its Related
Parties shall be Related Parties of any other Investor.
3.7 Confidentiality.
Each party hereto shall keep strictly confidential this Agreement and all information obtained by it with respect to the other parties
hereto in connection with this Agreement, and will use such information solely in connection with the transactions contemplated hereby
and the Transactions. Notwithstanding the foregoing, any party hereto and its Representatives (as defined below) may disclose this Agreement
and its terms and conditions (a) to any of such party’s Affiliates and its and their respective Affiliates’ controlling
persons, existing or prospective general or limited partners, officers, directors, employees, investment professionals, managers, equity
holders, investors, stockholders, members, agents, assignees, clients, financing sources or other representatives of any of the foregoing
(all of the foregoing, collectively, “Representatives”), (b) to an Investor or any of its Affiliates or any of
their respective Representatives or (c) if required by applicable Law or by any court order or by a recognized stock exchange, governmental
department or agency or other Governmental Entity, or in connection with court or other proceedings to enforce the terms and conditions
of this Agreement solely to the extent provided in this Agreement and on the terms and subject to the conditions hereof. Except as set
forth herein, this Agreement may not be used, circulated, quoted or otherwise referred to in any document, except with the written consent
of each of the Investors. Notwithstanding anything herein to the contrary, each of the Investors shall be permitted to communicate directly
with, and provide ordinary course information to, its or its Affiliates’ respective Representatives concerning the Transactions
or the Transaction Agreements on a confidential basis.
3.8 Exercise
of Rights and Remedies. No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of
any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed
as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any such
delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after
that waiver.
3.9 Assignment.
Except as set forth in Section 2.12 (Restrictions on Transfer), no party hereto may assign any of its rights or obligations
under this Agreement without the prior written consent of the other parties hereto except to such party’s Affiliates; provided
that no such assignment shall relieve the assigning party of any of its obligations hereunder.
3.10 Third
Parties. No Person who is not a party to this Agreement shall have any rights to enforce this Agreement; provided that the
parties hereto expressly intend that each Investor’s respective Affiliates and Related Parties, respectively, shall be regarded
as, and shall be entitled to rely upon its status as, an intended third party beneficiary of Section 2.2 (Failing Investors)
and Section 3.6 (No Recourse), respectively.
3.11 No
Partnership or Agency. The Investors, Parent and Merger Sub acknowledge and agree that (a) nothing in the Agreement shall constitute
a partnership between the parties hereto or any of them or constitute any such person as agent of any other for any purpose whatever and
none shall have authority or power to bind the others or to contract in the name of or create liability against the others in any way
or for any purpose save as expressly authorized in writing from time to time, (b) this Agreement is not intended to, and does not
create any agency, partnership, fiduciary or joint venture relationship between any party and neither this Agreement nor any other document
or agreement entered into by any party relating to the subject matter hereof will be construed to suggest otherwise, and (c) the
obligations of each Investor under this letter agreement are solely contractual in nature.
3.12 Interpretation.
As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to
be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The section headings
of this Agreement are included for reference purposes only and shall not affect the construction or interpretation of any of the provisions
of this Agreement. In the event an ambiguity or question of intent arises, this Agreement shall be construed as if drafted jointly by
Parent, Merger Sub and the Investors, and no presumption or burden of proof shall arise, or rule of strict construction applied,
favoring or disfavoring Parent, Merger Sub and/or any Investor by virtue of the authorship of any of the provisions of this Agreement.
3.13 Counterparts.
This Agreement may be executed in counterparts, all of which, when taken together, shall constitute one and the same agreement.
3.14 Compliance.
BCI confirms that its investment in Holdco as contemplated in this Agreement (including Exhibit D) as of the date hereof complies
with the 30% Rule (as defined below) applicable to BCI. Notwithstanding the foregoing, SCP and BCI shall use their respective reasonable
efforts to take, and shall use their rights as equityholders to cause Holdco, Parent and Merger Sub, as applicable, to take any action
or step reasonably requested by BCI to ensure the direct or indirect investment in, and continued direct or indirect ownership by, BCI
or its Affiliates (including any entity managed or advised by BCI or their Affiliates) of the equity securities of Holdco, Parent, Merger
Sub, and the Company complies with the 30% Rule (as defined below), including as is reasonably necessary to ensure continued compliance
in connection with the exercise of any pre-emptive rights, options or obligations to acquire or convert equity securities; provided,
however, that in no event will SCP be required to take (or omit to take), or use efforts to cause Holdco, Parent or Merger Sub
to take (or omit to take), any action or step that would, or would reasonably be expected to, have an adverse impact on it, any of its
Affiliates, any of its or their respective investors or direct or indirect equity holders, Holdco, Parent, Merger Sub, the Company or
any of their respective subsidiaries; provided, further, that SCP shall work in good faith with BCI to find an alternative
solution that does not have such an adverse impact, and in the event such alternative solution solely has an adverse economic impact (but
no other adverse impacts), SCP agrees to take such reasonable actions or steps so long as BCI agrees to reimburse SCP and its Affiliates
in full for such adverse economic impact (including reasonable and documented out-of-pocket costs and expenses, including professional
fees, relating thereto). For the purposes hereof, “30% Rule” means those certain provisions under the Pension Benefits
Standards Act (British Columbia) that prohibit certain of BCI’s clients from investing the monies of a pension plan in securities
of a corporation (or equivalent entity) to which are attached more than 30% of the votes to elect directors (or equivalent persons) of
a corporation (or equivalent entity).
[Signature pages follow]
IN WITNESS WHEREOF, the undersigned have caused
this Agreement to be executed as of the date first written above.
|
Condor
Holdings llc |
|
By: Searchlight III CVL L.P., its sole member |
|
By: Searchlight III CVL GP, LLC, its general partner |
|
|
|
By: |
/s/ Andrew Frey |
|
|
Name: |
Andrew Frey |
|
|
Title: |
Authorized Person |
|
|
|
Condor
merger sub inc. |
|
|
|
By: |
/s/ Andrew Frey |
|
|
Name: |
Andrew Frey |
|
|
Title: |
Authorized Person |
[Signature Page to
Interim Investors’ Agreement]
|
Searchlight
Capital III, L.P. |
|
By: Searchlight Capital Partners III GP, L.P., its general partner |
|
By: Searchlight Capital Partners III GP, LLC, its general partner |
|
|
|
By: |
/s/ Andrew Frey |
|
|
Name: |
Andrew Frey |
|
|
Title: |
Authorized Person |
|
|
|
Searchlight
Capital III PV, L.P. |
|
By: Searchlight Capital Partners III GP, L.P., its general partner |
|
By: Searchlight Capital Partners III GP, LLC, its general partner |
|
|
|
By: |
/s/ Andrew Frey |
|
|
Name: |
Andrew Frey |
|
|
Title: |
Authorized Person |
[Signature Page to
Interim Investors’ Agreement]
|
BRITISH COLUMBIA INVESTMENT MANAGEMENT
CORPORATION |
|
|
|
By: |
/s/ Mark Johnston |
|
|
Name: |
Mark Johnston |
|
|
Title: |
Managing Director, Private Equity |
[Signature Page to Interim Investors’
Agreement]
Exhibit (d)(iv)
Searchlight Capital III, L.P.
Searchlight Capital III PV, L.P.
October 15, 2023
Condor Holdings LLC
c/o Searchlight Capital Partners, L.P.
745 Fifth Avenue, 27th Floor
New York, New York 10151
Re: Condor Equity Commitment Letter
Ladies and Gentlemen:
Reference
is made to (i) the Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”), by and
among Condor Holdings LLC, a Delaware limited liability company (“Parent”), Condor Merger Sub Inc., a Delaware corporation
and a wholly owned subsidiary of Parent (“Merger Sub”), and Consolidated Communications Holdings, Inc., a Delaware
corporation (the “Company”), pursuant to which, among other things, and subject to the terms and conditions set forth
therein, Merger Sub will merge with and into the Company (the “Merger”) with the Company surviving the Merger as a
wholly owned Subsidiary of Parent and (ii) the Equity Commitment Letter, dated as of the date hereof, by and between Parent and British
Columbia Investment Management Corporation, in respect of a pooled investment portfolio formed under the Pooled Investment Portfolios
Regulation (British Columbia) and known as the “2020 Private Equity Fund” (the “Other Investor” and such
letter, the “Other Equity Commitment Letter”). Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Merger Agreement. The term “affiliate,” as used herein, shall have the meaning ascribed to
it in the Merger Agreement, disregarding the last two provisos of the definition thereof. This letter agreement (this “letter
agreement”) is being delivered to the Parent in connection with the execution of the Merger Agreement.
1. Commitment.
This letter agreement confirms the commitment of the undersigned (each, an “Equity Investor” and collectively, the
“Equity Investors”), severally and not jointly, and not jointly and severally, subject to the terms and conditions
set forth herein and in the Merger Agreement, to purchase, or to cause one or more of its permitted assignees to purchase, directly or
indirectly, equity interests of Parent at the Closing in an aggregate amount equal to the percentage of the Aggregate Commitment (as
defined below) set forth opposite such Equity Investor’s name on Exhibit A hereto (such amount with respect to each Equity
Investor is referred to herein as such Equity Investor’s “Investor Commitment”); provided that no Equity
Investor shall, under any circumstances, be obligated to purchase, directly or indirectly, equity from Parent or otherwise provide any
funds to Parent in an amount exceeding the amount of such Equity Investor’s Investor Commitment. The term “Aggregate Commitment”
means $282,941,176 or such lesser amount as is equal to (a) 76.47%
of (b) such amount as is in the aggregate, together with the available cash of the Company and its Subsidiaries on
the Closing Date, sufficient to pay the aggregate Merger Consideration at the Closing under the Merger Agreement. Each Equity Investor
hereby confirms that it has (and will have at such time as such commitment is due and payable at the Closing) available cash, unfunded
capital commitments and/or other access to available funds in an amount not less than such Equity Investor’s Investor Commitment,
and no internal or other approval is required for such Equity Investor to fulfill its obligations hereunder pursuant to the terms of
this letter agreement. No Equity Investor shall under any circumstances be obligated to fund any of such Equity Investor’s Investor
Commitment evidenced hereby except in connection with the Closing in accordance with and subject to the terms hereof.
2. Funding.
Each Equity Investor’s obligation to fund its Investor Commitment is subject to the terms of this letter agreement and subject to
the requirements that the following occur: (a) all of the conditions set forth in Section 6.1 (Conditions to Obligations
of Each Party Under This Agreement) and Section 6.3 (Conditions to Obligations of Parent and Merger Sub Under This Agreement)
of the Merger Agreement have been and continue to be satisfied or waived by Parent and Merger Sub (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the substantially concurrent satisfaction of such conditions) and (b) the
substantially concurrent occurrence of (i) the Closing and (ii) the funding of the Aggregate Commitment as defined in, and pursuant
to, the Other Equity Commitment Letter in accordance with the terms thereof (provided, however, that the failure of the
condition set forth in this clause (b)(ii) shall not limit or impair the ability of the Company to enforce the obligations of the
Equity Investors under, and in accordance with, this letter agreement if (x) the Company is also enforcing the obligations of the
Other Investor to fund the Aggregate Commitment as defined in, and pursuant to, the Other Equity Commitment Letter or (y) the Other
Investor is prepared to satisfy its obligations to fund the Aggregate Commitment as defined in, and pursuant to, the Other Equity Commitment
Letter substantially concurrently with the funding of the Investor Commitments pursuant to this letter agreement). For the avoidance of
doubt, the obligations of the Equity Investors under this letter agreement and of the Other Investor under the Other Equity Commitment
Letter shall be several and not joint, and not joint and several, and the Equity Investors shall not have any liability or obligation
whatsoever for or in respect of the Other Equity Commitment Letter. In no event shall this letter agreement or the funding obligations
set forth herein be enforced unless the Other Equity Commitment and the funding obligations set forth in the Other Equity Commitment Letter
(and the funding obligations of each Equity Investor hereunder) are being concurrently enforced by Parent (or, in the case of the Other
Equity Commitment Letter, such funding obligations set forth in the Other Equity Commitment Letter have already been satisfied), pro rata
based on the Aggregate Commitment (as defined in the Other Equity Commitment Letter) set forth therein and the Aggregate Commitment herein
(and, with respect to the funding obligations of the Equity Investors hereunder, pro rata based on the amount of each Equity Investor’s
Investor Commitment).
3. Termination.
The obligation of each Equity Investor to fund all or any portion of its Investor Commitment will terminate automatically and immediately
and cease to be of any further force or effect without the need for any further action by any Person upon the earliest to occur of (i) the
consummation of the Closing (including the payment of the Merger Consideration), (ii) the valid termination of the Merger Agreement
or the Other Equity Commitment Letter (other than as a result of the funding of the Other Investor’s Aggregate Commitment, as defined
in the Other Equity Commitment Letter, required to be funded under the Other Equity Commitment Letter), in each case, in accordance with
its terms, (iii) the payment by an Equity Investor or the Other Investor of any amount in respect of the Guaranteed Obligations (as
defined in the Guaranty or the Other Guaranty, as applicable) pursuant to the Guaranty or the Other Guaranty, as applicable, on the terms
and subject to the conditions thereof, (iv) the award of any monetary damages to the Company or any Company Related Party in accordance
with the Merger Agreement or (v) the assertion, directly or indirectly, by the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates or other Representatives of any Claim against any Equity Investor, the Other Investor, Parent, Merger
Sub or any Related Party (as defined below) of the foregoing or any Related Party of any such Related Party in connection with the Merger
Agreement, the Guaranty, the Other Guaranty, the Other Equity Commitment Letter, this letter agreement or any other document, certificate
or instrument delivered in connection herewith or therewith or any of the transactions contemplated thereby or hereby (including the termination
or abandonment thereof or in respect of any written or oral representations made or alleged to be made in connection therewith or herewith),
except, in the case of clause (v) of this Section 3, for (a) a claim brought by the Company pursuant to this letter agreement
solely against any Equity Investor as a third party beneficiary of this letter agreement and solely as and to the extent specified in,
and on the terms and subject to the conditions of, Section 7 (Binding Effect) hereof seeking (1) to enjoin the assignment or
amendment or waiver of this letter agreement without the consent of the Company to the extent such consent is expressly required under
Section 6 or 12 hereof, as applicable, or (2) specific performance of such Equity Investor’s obligation to cause such
Equity Investor’s Investor Commitment to be funded at the Closing, (b) a claim brought by the Company pursuant to the Limited
Guaranty, dated as of the date hereof, by the Equity Investors in favor of the Company (the “Guaranty”), solely against
the Equity Investors in their capacity as guarantors seeking payment of the Guaranteed Obligations (as defined in the Guaranty) and solely
as and to the extent specified in, and on the terms and subject to the conditions of, the Guaranty, (c) a claim brought by the Company
pursuant to the Other Equity Commitment Letter solely against the Other Investor, or pursuant to the Limited Guaranty, dated as of the
date hereof, by the Other Investor in favor of the Company (the “Other Guaranty”), solely against the Other Investor
in its capacity as guarantor seeking payment of the Guaranteed Obligations (as defined in the Guaranty), and solely as and to the extent
specified in, and on the terms and subject to the conditions of, the Other Equity Commitment Letter or Other Guarantee, as applicable,
(d) a claim brought by the Company pursuant to the Merger Agreement solely against Parent or Merger Sub and solely as and to the
extent specified in, and on the terms and subject to the conditions of, the Merger Agreement, (e) a claim brought by the Company
pursuant to the Governance Agreement solely against Searchlight III CVL, L.P. to enforce the Governance Agreement, including the confidentiality
provisions thereof, and solely as and to the extent specified in, and on the terms and subject to the conditions of, the Governance Agreement
or (f) a claim brought by the Company pursuant to that certain letter agreement, dated June 13, 2023, by and between the Company
and Searchlight III CVL, L.P. solely against Searchlight III CVL, L.P. and solely as and to the extent specified in, and on the terms
and subject to the conditions of, such letter agreement (clauses (a) - (f) collectively, the “Excluded Claims”).
Sections 3 (Termination), 4 (Sole and Exclusive Remedies), 5 (No Recourse), 7 (Binding Effect), 8 (Confidentiality)
and 10 (Waiver of Trial by Jury; Governing Law; Consent to Jurisdiction) hereof shall survive any such termination.
4. Sole
and Exclusive Remedies. (x) The Excluded Claims shall, and are intended to, be the sole and exclusive direct or indirect remedies
available to the Company and its affiliates against the Equity Investors, Parent and Merger Sub (as applicable), and (y) no other
remedies may be directly or indirectly obtained or sought from any Equity Investor, Parent or Merger Sub, nor shall any remedy be directly
or indirectly obtained or sought from any former, current or future direct or indirect equity holder, controlling Person, general or limited
partner, shareholder, member, manager, director, officer, employee, agent, affiliate, assignee, client, contractor, SCP Person, Representative
or financing source of any of the foregoing (any such Person, other than the undersigned, Parent, Merger Sub or their respective permitted
assignees under the Merger Agreement, a “Related Party”; provided that in no event shall the Company or its
Subsidiaries be considered a Related Party of Parent, Merger Sub, any Equity Investor or any of their respective Related Parties) or any
Related Party of any such Related Party, in each case in respect of any liabilities or obligations arising under, or in connection with,
the Merger Agreement, the Guaranty, the Other Guaranty, the Other Equity Commitment Letter or this letter agreement or the transactions
contemplated thereby or hereby, or in respect of any written or oral representations made or alleged to be made in connection therewith
or herewith, including in the event Parent or Merger Sub breaches its obligations under the Merger Agreement, whether or not any such
breach is caused by an Equity Investor’s breach of its obligations under this letter agreement.
5. No
Recourse. Notwithstanding anything that may be expressed or implied in this letter agreement, Parent, by its acceptance hereof, covenants,
acknowledges and agrees that no person other than an Equity Investor shall have any obligation hereunder and that, (a) notwithstanding
that an Equity Investor may be a partnership, limited partnership, limited liability company or other form of entity, no recourse (whether
at law, in equity, in contract, in tort or otherwise) hereunder or under any document, certificate or instrument delivered in connection
herewith, or in respect of any written or oral representations made or alleged to be made in connection herewith or therewith, shall be
had against Parent, Merger Sub, any Equity Investor, any Related Party of the foregoing or any Related Party of any such Related Party
(including, without limitation, any liabilities or obligations arising under, or in connection with, the Merger Agreement, the Guaranty
or this letter agreement and the transactions contemplated thereby and hereby or the termination or abandonment thereof), with respect
to any suit, action, litigation, claim, charge, complaint, grievance, arbitration or proceeding, at law or in equity, or by, in or before
any court, tribunal, commission, agency or other governmental authority or similar proceeding (each, a “Claim”), including,
without limitation, in the event Parent or Merger Sub breaches its obligations under the Merger Agreement and including whether or not
Parent’s or Merger Sub’s breach is caused by the breach by an Equity Investor of its obligations under this letter agreement,
whether by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation
or other applicable Law, and (b) no personal liability whatsoever will attach to, be imposed on or otherwise incurred by Parent,
Merger Sub, any Equity Investor, any Related Party of the foregoing or any Related Party of any such Related Party under, or in connection
with, this letter agreement or the Merger Agreement or any documents, certificates or instruments delivered in connection herewith or
in connection with the Merger Agreement, or for any Claim based on, in respect of, or by reason of such obligations hereunder or by their
creation; provided that the foregoing clauses (a) and (b) shall not prohibit or limit the Excluded Claims. Nothing in
this letter agreement, express or implied, is intended to or shall confer upon any person, other than Parent, the Company (only
to the extent expressly set forth in this letter agreement) and the Equity Investors, any right, benefit or remedy of any nature whatsoever
under or by reason of this letter agreement.
6. Assignment.
This letter agreement and each Equity Investor’s commitment hereunder shall not be assignable, directly or indirectly, to any other
Person without the prior written consent of Parent and the Company (as a third party beneficiary hereunder), and any attempted assignment
without such consent shall be null and void and of no force and effect, except that each Equity Investor may without the consent of Parent
or the Company assign its commitments hereunder to funds or investment vehicles affiliated with such Equity Investor; provided,
however, that notwithstanding any such assignment, each Equity Investor shall remain liable to perform all of its obligations hereunder,
except to the extent its Investor Commitment is actually funded by such affiliated entity (in which case such Investor Commitment and
the Aggregate Commitment shall be reduced dollar for dollar by any amounts so funded). This letter agreement shall not be assignable by
Parent without the prior written consent of the Equity Investors and the Company (as a third party beneficiary hereunder), other than
to Parent’s permitted assignees under the Merger Agreement.
7. Binding
Effect. This letter agreement shall be binding on each of the parties hereto for the benefit of the parties hereto, and nothing in
this letter agreement, express or implied, shall be construed to confer upon or give any Person other than the parties hereto any benefits,
rights or remedies of any nature whatsoever under or by reason of, or any rights to enforce or cause Parent to enforce, the Investor
Commitment of any Equity Investor, or any provision of this letter agreement; provided that the Company may rely upon this letter
agreement as an express third party beneficiary, solely (a) to seek to enjoin the assignment or amendment or waiver of this letter
agreement without the consent of the Company to the extent such consent is expressly required under Section 6 or the first sentence
of Section 12 hereof, as applicable, or (b) to the extent that the Company is awarded, in accordance with and subject to the
terms of Section 9.11 (Specific Performance) of the Merger Agreement, specific performance of the Equity Investors obligations
to fund their respective Investor Commitments at the Closing under this letter agreement; provided, that Merger Sub, each Related Party
of Parent, Merger Sub or any Equity Investor and any Related Party of any such Related Party may rely upon Sections 4 and 5 of this letter
agreement as an intended third-party beneficiary. Neither Parent nor the Company will be required to prove actual damages in connection
with seeking specific performance in accordance with the terms hereof. The Equity Investors hereby waive any requirement for the securing
or posting of any bond in connection with such remedy, and the Equity Investors hereby agree not to assert that the remedy of specific
enforcement is unenforceable, invalid, contrary to law or inequitable on the basis that (i) Parent or the Company has an adequate
remedy at law or (ii) an award of specific enforcement is not an appropriate remedy for any reason at law or equity. Except as expressly
set forth in Section 6, the first sentence of this Section 7 or the first sentence of Section 12, nothing set forth in
this letter agreement shall be construed to confer upon or give any Person other than Parent any benefits, rights or remedies under or
by reason of, or any rights to enforce or cause Parent to enforce, the Investor Commitment of any Equity Investor or any provision of
this letter agreement. Parent’s creditors shall have no right to enforce this letter agreement or to cause Parent to enforce this
letter agreement. For the avoidance of doubt and notwithstanding anything to the contrary contained in the Merger Agreement or in this
letter agreement, and notwithstanding that this letter agreement is referred to in the Merger Agreement, no party other than Parent and,
only to the extent expressly provided in this letter agreement, the Company, shall have any rights against any Equity Investor pursuant
to this letter agreement.
8. Confidentiality.
This letter agreement shall be treated as strictly confidential and is being provided to Parent and the Company solely in connection with
the Merger Agreement and the transactions contemplated thereby. This letter agreement may not be disclosed to any Person or used, circulated,
quoted or otherwise referred to in any document (other than the Merger Agreement, the Other Equity Commitment Letter, the Guaranty and
the Other Guaranty), except with the written consent of each Equity Investor; provided that Parent, the Company and the parties
hereto may each disclose the existence of this letter agreement (a) to its respective Representatives and affiliates if it agrees
to cause each such Representative or affiliate to treat this letter agreement and its contents as confidential, and to cause its directors,
officers and advisors to so treat this letter agreement and its contents as confidential and agrees to be responsible for any breach by
any such Representative of such obligations, (b) to the extent required by applicable Law or stock exchange rule or requirement
or in connection with any securities regulatory agency filings relating to the transactions contemplated by the Merger Agreement, (c) as
reasonably necessary in connection with filings, approvals and rulings to be obtained from any Governmental Authority (it being understood
that any such filing may include the filing of a copy of this letter agreement), or (d) as necessary to enforce any rights pursuant
to any proceeding that may arise between or among any of the parties hereto and/or the Company in respect of this letter agreement.
9. Equity
Investor Representations. Each Equity Investor hereby represents and warrants that (a) it is an entity formed and validly existing
under the laws of its jurisdiction of formation and it has the power and authority to execute, deliver and perform this letter agreement;
(b) the execution, delivery and performance of this letter agreement by such Equity Investor has been duly and validly authorized
and approved by all necessary limited partnership, limited liability company, or corporate action, as applicable, and no other proceedings
or actions on the part of such Equity Investor are necessary therefor; (c) this letter agreement has been duly and validly executed
and delivered by it and constitutes a valid and legally binding obligation of it, enforceable against such Equity Investor in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); (d) the
execution, delivery and performance by such Equity Investor of this letter agreement does not and will not violate the organizational
or governing documents of such Equity Investor; and (e) as of the Closing, to the extent (if any) that any Equity Investor’s
organizational or governing documents limit the amount it may commit to any one investment, such Equity Investor’s Investor Commitment
will be less than the maximum amount that it is permitted to invest in any one portfolio investment pursuant to the terms of such organizational
or governing documents.
10. Waiver
of Trial by Jury; Governing Law; Consent to Jurisdiction. Sections 9.10, 9.13 and 9.14 of the Merger Agreement are incorporated herein,
mutatis mutandis.
11. Counterparts.
This letter agreement may be executed in multiple counterparts (and may be delivered by facsimile transmission or via email as a portable
document format (.pdf)), each of which will be deemed an original but all of which together shall constitute one and the same instrument.
This letter agreement will become effective upon its acceptance by Parent, as evidenced by the delivery to each Equity Investor of a
counterpart of this letter agreement executed by Parent.
12. Amendments
and Waivers. No amendment or waiver of any provision of this letter agreement will be valid and binding unless it is in writing and
signed by Parent and each Equity Investor and the Company (as a third party beneficiary hereunder). Parent shall not release the Other
Investor under the Other Equity Commitment Letter from any obligations therein or agree to any amendment, supplement, modification or
other waiver of any provision therein without the prior written consent of the Equity Investors.
13. Interpretation.
The parties have participated jointly in negotiating and drafting this letter agreement. If an ambiguity or a question of intent or interpretation
arises, this letter agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision of this letter agreement.
[Remainder of page intentionally left blank.]
Very truly yours,
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Searchlight Capital III, L.P. |
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By: |
Searchlight Capital Partners III GP, L.P., |
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its general partner |
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By: |
Searchlight Capital Partners III GP, LLC, |
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its general partner |
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By: |
/s/ Andrew Frey |
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Name: Andrew Frey |
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Title: Authorized Person |
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Searchlight Capital III PV, L.P. |
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By: |
Searchlight Capital Partners III GP, L.P., |
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its general partner |
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By: |
Searchlight Capital Partners III GP, LLC, |
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its general partner |
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By: |
/s/ Andrew Frey |
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Name: Andrew Frey |
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Title: Authorized Person |
Accepted and Agreed,
CONDOR HOLDINGS, LLC
By: Searchlight III CVL L.P., its sole member
By: Searchlight III CVL GP, LLC, its general partner
By: |
/s/
Andrew Frey |
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Name: Andrew Frey |
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Title: Authorized Person |
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EXHIBIT A
Equity Investor |
Investor Commitment
(Percentage of Aggregate Commitment) |
Searchlight Capital III, L.P. |
$161,514,369 (57.08%) |
Searchlight Capital III PV, L.P. |
$121,426,807 (42.92%) |
Exhibit (d)(v)
LIMITED GUARANTY
Limited Guaranty, dated as of October 15,
2023 (this “Guaranty”), by each of the parties listed on Exhibit A hereto (each, a “Guarantor”
and collectively, the “Guarantors”), in favor of Consolidated Communications Holdings, Inc., a Delaware corporation
(the “Guaranteed Party”). Reference is made to the Agreement and Plan of Merger, dated as of the date hereof (as it
may be amended, restated, supplemented or modified from time to time, the “Merger Agreement”), by and among Condor
Holdings LLC, a Delaware limited liability company (“Parent”), Condor Merger Sub Inc., a Delaware corporation and a
wholly owned subsidiary of Parent (“Merger Sub”), and the Guaranteed Party, pursuant to which, among other things,
on the Closing Date, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Guaranteed
Party (the “Merger”) with the Guaranteed Party surviving the Merger as a wholly owned Subsidiary of Parent. Except
as otherwise specified herein, capitalized terms used herein but not otherwise defined have the meanings ascribed to them in the Merger
Agreement. The term “affiliate,” as used herein, shall have the meaning ascribed to it in the Merger Agreement, disregarding
the last two provisos of the definition thereof.
1. Limited
Guaranty. To induce the Guaranteed Party to enter into the Merger Agreement, each Guarantor hereby guarantees, severally and not jointly,
and not jointly and severally, to the Guaranteed Party, subject to the terms and subject to the conditions set forth herein and in the
Merger Agreement, without duplication, the payment of the percentage set forth opposite such Guarantor’s name on Exhibit A
hereto of any amount for which Parent or Merger Sub is determined by a court of competent jurisdiction to be liable pursuant to any final,
binding and non-appealable judgment thereof in respect of any claim for monetary damages made by the Guaranteed Party in accordance with,
and on the terms and subject to the conditions set forth in, the Merger Agreement and herein (any such amounts, the “Guaranteed
Obligations”); provided that (i) the maximum liability of each Guarantor hereunder shall not exceed the percentage
of the Maximum Aggregate Amount (as defined below) set forth opposite such Guarantor’s name on Exhibit A hereto (such
amount with respect to each Guarantor is such Guarantor’s “Maximum Guarantor Amount”) and (ii) the maximum
aggregate liability of the Guarantors hereunder shall not exceed $24,394,118 (the “Maximum Aggregate Amount”), it being
understood and agreed that this Guaranty may not be enforced without giving full and absolute effect to the Maximum Aggregate Amount and
each Maximum Guarantor Amount and may be enforced for the payment of money only. The Guaranteed Party, on behalf of itself and its Subsidiaries
and its and their respective Related Parties, hereby agrees that the Guarantors shall in no event be required to pay in the aggregate
more than the Maximum Aggregate Amount (and that each Guarantor shall in no event be required to pay in the aggregate more than such Guarantor’s
Maximum Guarantor Amount) under, in respect of, or in connection with this Guaranty or the Merger Agreement, and no Guarantor shall have
any obligation or liability to any Person under, in respect of or in connection with this Guaranty or the Merger Agreement other than
(A) to the Guaranteed Party under this Guaranty as expressly set forth herein and (B) to Parent under the Equity Commitment
Letter, dated as of the date hereof, by and between Parent and the Guarantors (the “Equity Commitment Letter”), as
expressly set forth therein. Notwithstanding anything to the contrary contained in this Guaranty or in the Merger Agreement, the Guaranteed
Party hereby agrees, on behalf of itself and its Subsidiaries and its and their respective Related Parties, that to the extent Parent
and Merger Sub are relieved of all or any portion of their obligations under the Merger Agreement by satisfaction thereof or pursuant
to any other agreement with the Guaranteed Party, each Guarantor shall be similarly relieved, to such extent, of its respective obligations
under this Guaranty. For the avoidance of doubt, the obligations of the Guarantors under this Guaranty and of British Columbia Investment
Management Corporation, in respect of a pooled investment portfolio formed under the Pooled Investment Portfolios Regulation (British
Columbia) and known as the “2020 Private Equity Fund” (the “Other Guarantor”) under the Limited Guaranty,
dated as of the date hereof, by the Other Guarantor in favor of the Guaranteed Party (the “Other Guaranty”) shall be
several and not joint, and not joint and several, and the Guarantors shall not have any liability or obligation whatsoever for or in respect
of the Other Guaranty. In no event shall this Guaranty be enforced unless the Other Guaranty is (and the obligations of each Guarantor
hereunder are) being concurrently enforced by the Company (or, in the case of the Other Guaranty, the obligations under such Other Guaranty
have already been satisfied in full), pro rata based on the Maximum Aggregate Amount (as defined in the Other Guaranty) and the Maximum
Aggregate Amount herein (and, with respect to the obligations of the Guarantors hereunder, pro rata based on the amount of each Guarantor’s
Maximum Guarantor Amount).
2. Terms
of Limited Guaranty; Recovery Claim.
(a) This
Guaranty is a primary and original obligation of the Guarantors (and is not merely the creation of a surety relationship) and is a guarantee
of payment, not collection, and a separate action or actions may be brought and prosecuted against the Guarantors to enforce this Guaranty,
irrespective of whether any action is brought against Parent, Merger Sub or any other Person or whether Parent, Merger Sub or any other
Person is joined in any such action or actions. Each Guarantor reserves the right, notwithstanding anything to the contrary provided herein,
to assert, as a defense to, or release or discharge of, any obligation of such Guarantor hereunder, any claim, set off, deduction, release
or defenses which any Guarantor, Parent, Merger Sub or any of their affiliates could assert against the Guaranteed Party under the terms
of this Guaranty or the Merger Agreement (the “Preserved Matters”).
(b) The
liability of the Guarantors under this Guaranty shall, to the fullest extent permitted under applicable Law, be absolute, irrevocable
and unconditional, irrespective of:
(i) any
change in the corporate existence, structure or ownership of Parent, Merger Sub or any Guarantor, or any insolvency, bankruptcy, reorganization,
liquidation or other similar proceeding of Parent, Merger Sub or any Guarantor or affecting any of their respective assets;
(ii) any
change in the manner, place or terms of payment or performance, or any change or extension of the time of payment or performance of, renewal
or alteration of, the Guaranteed Obligations, or any liability incurred directly or indirectly in respect thereof;
(iii) the
existence of any claim, set-off or other right that the Guarantors may have at any time against Parent, Merger Sub or any of their respective
Related Parties, whether in connection with any of the Guaranteed Obligations or otherwise;
(iv) the
right by statute or otherwise to require the Guaranteed Party to institute suit against Parent or Merger Sub or to exhaust any rights
and remedies which the Guaranteed Party has or may have against Parent or Merger Sub;
(v) for
the avoidance of doubt subject to Section 6, the failure or delay on the part of the Guaranteed Party to assert any claim or demand
or to enforce any right or remedy against Parent or any Guarantor;
(vi) the
addition or substitution of any Person now or hereafter liable with respect to any of the Guaranteed Obligations or otherwise interested
in the transactions contemplated by the Merger Agreement;
(vii) the
adequacy of any other means the Guaranteed Party may have of obtaining payment of any of the Guaranteed Obligations;
(viii) the
value, genuineness, validity, illegality or enforceability of the Merger Agreement or the Equity Commitment Letter to which the Guarantors
are party, in each case in accordance with its terms (except as such value, genuineness, validity, illegality or enforceability may be
questioned as to the Guaranteed Party); or
(ix) any
incapacity, lack of authority or limitation of status or power of Parent or Merger Sub.
(c) Subject
to the Maximum Aggregate Amount and the terms and conditions of the Merger Agreement, to the fullest extent permitted by applicable Laws,
the Guarantors hereby expressly waive any and all rights or defenses arising by reason of any Law which would otherwise require any election
of remedies by the Guaranteed Party. The Guarantors waive promptness, diligence, notice of acceptance of this Guaranty and of the Guaranteed
Obligations, presentment, demand for payment, notice of nonperformance, default, dishonor and protest, notice of the incurrence of any
Guaranteed Obligations and all other notices of any kind (other than the provision to Parent or Merger Sub of notices required to be provided
to Parent or Merger Sub pursuant to the Merger Agreement or to the applicable parties as set forth in any other agreement contemplated
in connection with the Transactions), all defenses which may be available by virtue of any stay, moratorium Law or other similar Law now
or hereafter in effect, any right to require the marshaling of assets of any Person interested in the transactions contemplated by the
Merger Agreement, and all suretyship defenses generally (in each case, other than (i) Preserved Matters or (ii) fraud by the
Guaranteed Party or any of its Subsidiaries or its or their respective Related Parties). Each Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the transactions contemplated by the Merger Agreement and that the waivers set forth in
this Guaranty are knowingly made in contemplation of such benefits.
Notwithstanding the foregoing or anything to the contrary in this Guaranty,
each of the Guarantors shall be fully released and discharged hereunder if the Guaranteed Obligations are paid in full by Parent, Merger
Sub or any other Person in accordance with the Merger Agreement.
3. Sole
Remedy.
(a) The
Guaranteed Party acknowledges and agrees that:
(i) the
sole cash assets of Parent and Merger Sub are cash in a de minimis amount, and that no additional funds are expected to be contributed
to Parent or Merger Sub unless and until the Closing occurs in accordance with the terms and conditions of the Merger Agreement, and that,
without limiting the express third-party beneficiary rights of the Guaranteed Party under the Equity Commitment Letters, subject to all
of the terms, conditions and limitations in the Merger Agreement and therein, the Guaranteed Party shall not have any right to cause any
assets to be contributed to Parent or Merger Sub by any Guarantor, any Guarantor’s Related Parties or any other Person;
(ii) that
the Guaranteed Party is bound by and shall comply with the applicable terms and conditions of Sections 2, 3, 4, 5, 7 and 8 of the Equity
Commitment Letter;
(iii) the
Guarantors shall not have any obligation or liability to any Person relating to, arising out of or in connection with this Guaranty, the
Merger Agreement, the Equity Commitment Letter, that certain Equity Commitment Letter entered into by and between Parent and the Other
Guarantor on the date hereof (the “Other Equity Commitment Letter”), the Other Guaranty or the transactions contemplated
hereby or thereby, other than as expressly set forth herein or in the Equity Commitment Letter; and
(iv) notwithstanding
anything to the contrary in this Guaranty, the Equity Commitment Letter, the Other Equity Commitment Letter, the Other Guaranty or the
Merger Agreement, it has no and shall have no right of recovery against Parent, Merger Sub, any Guarantor, any Related Party (as defined
below) of any of the foregoing or any Related Party of any such Related Party, through any Guarantor, Parent, Merger Sub or otherwise,
whether by or through attempted piercing of the corporate, limited liability company or limited partnership veil, by or through a claim
by or on behalf of Parent or Merger Sub against a Guarantor or any Related Party of any Guarantor or any Related Party of any such Related
Party, or otherwise, except for its rights against the Guarantors under this Guaranty pursuant to the terms and subject to the conditions
hereof and except for the Excluded Claims (as defined in the Equity Commitment Letter).
(b) Recourse
against the Guarantors under this Guaranty shall be the sole and exclusive remedy (whether at law, in equity, in contract, in tort or
otherwise) of the Guaranteed Party and its Subsidiaries and all of its and their respective Related Parties against any Guarantor, Parent,
Merger Sub, any Related Party of any of the foregoing or any Related Party of any such Related Party in respect of any breaches, losses
or damages arising under, or in connection with, the Merger Agreement or the transactions contemplated thereby, including in respect
of any written or oral representations made or alleged to be made in connection therewith, other than with respect to any Excluded Claims.
The Guaranteed Party hereby unconditionally and irrevocably covenants and agrees that it shall not institute, and shall cause its Subsidiaries
and its and their respective Related Parties not to institute, any proceeding or bring any other claim (whether at law, in equity, in
contract, in tort or otherwise) arising under, or in connection with, the Merger Agreement, the Equity Commitment Letter, the Other Equity
Commitment Letter, this Guaranty, the Other Guaranty or the transactions contemplated thereby or hereby, or in respect of any written
or oral representations made or alleged to be made in connection therewith or herewith, against any Guarantor, Parent, Merger Sub, any
Related Party of any of the foregoing or any Related Party of any such Related Party, except for claims of the Guaranteed Party against
the Guarantors under this Guaranty and Excluded Claims. As used in this Guaranty, the term “Related Party” shall mean,
with respect to any Person, any former, current or future direct or indirect equity holder, controlling Person, general or limited partner,
shareholder, member, manager, director, officer, employee, agent, affiliate, assignee, client, contractor, Representative or financing
source of such Person (and with respect to a Guarantor, Parent or Merger Sub, in addition to the foregoing, shall also include any other
SCP Person, but shall exclude the Guarantors, Parent and Merger Sub); provided that in no event shall the Company or its Subsidiaries
be considered a Related Party of Parent, Merger Sub, any Guarantor or any of their respective Related Parties.
(c) Without
limiting the Company’s right to obtain specific performance of the Equity Financing at the Closing in accordance with the Merger
Agreement and the Equity Commitment Letters, the Guaranteed Party further covenants and agrees that it shall not have the right to recover,
and shall not recover, and shall not institute, directly or indirectly, and shall cause its Subsidiaries and its and their respective
officers, directors, affiliates or other Representatives not to institute, any proceeding or bring any other claim to recover, more than
the Maximum Aggregate Amount from the Guarantors in respect of any liabilities or obligations of the Guarantors, Parent or Merger Sub
or the respective assignees of the foregoing, or the applicable Maximum Guarantor Amount from each Guarantor and its assigns in respect
of any liabilities or obligations of the Guarantors, Parent or Merger Sub or the respective assignees of the foregoing, arising under
or in connection with the Merger Agreement, this Guaranty or the transactions contemplated thereby or hereby, and the Guaranteed Party
shall promptly return all monies paid to it or its Subsidiaries or its or their respective Related Parties by the Guarantors or their
assignees in excess of the Maximum Aggregate Amount or applicable Maximum Guarantor Amount.
(d) The
Guaranteed Party acknowledges that each Guarantor is agreeing to enter into this Guaranty in reliance on the provisions set forth in this
Section 3. This Section 3 shall survive termination of this Guaranty.
4. No
Waiver; Cumulative Rights. No failure on the part of the Guaranteed Party to exercise, and no delay in exercising, any right, remedy
or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Guaranteed Party of any right, remedy
or power hereunder preclude any other or future exercise of any right, remedy or power. Each and every right, remedy and power hereby
granted to the Guaranteed Party or allowed it by applicable Law or other agreement shall be cumulative and not exclusive of any other
and may be exercised by the Guaranteed Party at any time or from time to time.
5. Representations
and Warranties. Each Guarantor hereby represents and warrants with respect to itself that:
(a) it
is an entity formed and validly existing under the laws of its jurisdiction of formation and it has the power and authority to execute,
deliver and perform its obligations under this Guaranty;
(b) the
execution, delivery and performance by it of this Guaranty do not and will not (i) violate its constituent documents, (ii) violate
any applicable law or judgment, or (iii) result in any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of any benefit under, any
material contract to which it is a party (except, in the case of clauses (ii) and (iii), as would not prevent the Guarantors from
paying the Guaranteed Obligations pursuant to this Guaranty);
(c) the
execution, delivery and performance of this Guaranty have been duly authorized by all necessary action by such Guarantor and this Guaranty
has been duly executed and delivered by such Guarantor;
(d) all
consents, approvals, authorizations and permits of, filings with and notifications to, any Governmental Authority necessary for the due
execution, delivery and performance of this Guaranty by it have been obtained or made and all conditions thereof have been duly complied
with, and no other action by, and no notice to or filing with, any Governmental Authority is required in connection with the execution,
delivery or performance of this Guaranty (except, in each case, for such consents, approvals, authorizations, permits, actions, filings
and notifications as are set forth in Section 3.4 of the Merger Agreement or as would not prevent the Guarantors from paying the
Guaranteed Obligations pursuant to this Guaranty);
(e) this
Guaranty is a legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights
and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing; and
(f) such
Guarantor has unfunded capital commitments in an amount not less than such Guarantor’s Maximum Guarantor Amount or has such other
financial means at its disposal to enable such Guarantor to pay such Guarantor’s Maximum Guarantor Amount when due.
6. Termination.
This Guaranty shall terminate and the Guarantors shall have no further obligation under this Guaranty as of the earliest to occur of:
(a) consummation of the Merger and the Closing in accordance with the terms of the Merger Agreement (including the payment of the
Merger Consideration); (b) the grant of specific performance or any other equitable remedy in respect of the Merger or the Equity
Commitment Letter or the Other Equity Commitment Letter that specifically enforces (i) Parent’s and Merger Sub’s obligation
to consummate the Merger or (ii) the payment of any amount by a Guarantor under the Equity Commitment Letter or the Other Guarantor
under the Other Equity Commitment Letter; (c) the payment of the Maximum Aggregate Amount in respect of the Guaranteed Obligations;
(d) 90 days following the termination of the Merger Agreement in accordance with its terms unless prior to such date the Guaranteed
Party shall have commenced a Proceeding against any Guarantor, and Parent or Merger Sub, alleging that any such Guaranteed Obligations
are due and owing, in which case this Guaranty shall survive solely with respect to such obligations and shall terminate upon the final,
non-appealable resolution of all such Proceedings by a court of competent jurisdiction and the satisfaction by the Guarantors of any obligations
finally determined or agreed to be owed by the Guarantors consistent with the terms hereof; (e) the termination of the Other Guaranty
(other than as a result of the amounts due under such Other Guaranty being paid in full); and (f) the termination of this Guaranty
by mutual written agreement of the Guarantors and the Guaranteed Party. Upon any termination of this Guaranty in accordance with and subject
to the first sentence of this Section 6, no Person shall have any rights or claims against any of Parent, Merger Sub, any Guarantor,
any Related Party of any of the foregoing or any Related Party of any such Related Party under the Merger Agreement, this Guaranty, the
Equity Commitment Letter or in respect of any written or oral representations made or alleged to be made in connection herewith, whether
at Law or equity, in contract, in tort or otherwise, and none of Parent, Merger Sub, any Guarantor, any Related Party of any of the foregoing
or any Related Party of any such Related Party shall have any further liability or obligation relating to or arising out of the Merger
Agreement, this Guaranty, the Other Guaranty or the Equity Commitment Letters, in respect of the transactions contemplated thereby or
hereby or in respect of any written or oral representations made or alleged to be made in connection herewith or therewith, except that
Section 3, this Section 6, Section 15 and Section 17 will survive termination of this Guaranty in accordance with
their respective terms and conditions. In the event that the Guaranteed Party or any of its Subsidiaries or its or their respective officers,
directors, affiliates or other Representatives asserts, directly or indirectly, in any litigation or any other proceeding (whether at
Law, in equity, in contract, in tort or otherwise) that the provisions of Section 1 hereof limiting the Guarantors’ liability
to the Maximum Aggregate Amount or any Guarantor’s liability to such Guarantor’s Maximum Guarantor Amount or the provisions
of Section 3 hereof are illegal, invalid or unenforceable, in whole or in part, or asserts, directly or indirectly, in any litigation
or any other proceeding, any theory of liability against Parent, Merger Sub, any Guarantor, any Related Party of any of the foregoing
or any Related Party of any such Related Party with respect to the transactions contemplated by the Merger Agreement (including in respect
of any written or oral representations made or alleged to be made in connection therewith) other than an Excluded Claim, (i) the
obligations of each Guarantor under this Guaranty shall terminate forthwith and shall thereupon be null and void, (ii) if any Guarantor
has previously made any payments under this Guaranty, such Guarantor shall be entitled to recover such payments from the Guaranteed Party
and (iii) none of Parent or Merger Sub (except, in each case, with respect to any obligations under the Merger Agreement or, if the
Merger Agreement is validly terminated in accordance with its terms, obligations under the Merger Agreement that by their terms survive
the termination of the Merger Agreement), any Guarantor, any Related Party of any of the foregoing or any Related Party of any such Related
Party shall have any liability to the Guaranteed Party or any of its Subsidiaries or any of its or their respective Related Parties with
respect to the transactions contemplated by the Merger Agreement, the Equity Commitment Letter or this Guaranty (including in respect
of any written or oral representations made or alleged to be made in connection therewith or herewith).
7. Continuing
Guarantee. Except to the extent terminated pursuant to the provisions of Section 6 of this Guaranty, this Guaranty is a continuing
one and shall remain in full force and effect until the payment and satisfaction in full of the Guaranteed Obligations, shall be binding
upon the Guarantors, their successors and assigns, and shall inure to the benefit of, and be enforceable by, the Guaranteed Party and
its successors and permitted assigns. All obligations to which this Guaranty applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon.
8. Entire
Agreement. This Guaranty, together with the Merger Agreement, the Equity Commitment Letter, the Other Equity Commitment Letter and
the Other Guaranty, contain the complete agreement between the parties hereto with respect to the subject matter hereof and thereof and
supersede any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to
the subject matter hereof in any way, among Parent, Merger Sub, the Guarantors, any Related Party of any of the foregoing or any Related
Party of any such Related Party, on the one hand, and the Guaranteed Party or any of its Subsidiaries or its or their respective Related
Parties, on the other hand. Except as provided in this Guaranty, no representation or warranty has been made or relied upon by any of
the parties to this Guaranty with respect to this Guaranty.
9. Amendments
and Waivers. No amendment or waiver of any provision of this Guaranty will be valid and binding unless it is in writing and signed,
in the case of an amendment, by each of the Guarantors and the Guaranteed Party or, in the case of a waiver, by the party or each of the
parties against whom the waiver is to be effective. No waiver by any party of any breach or violation of, or default under, this Guaranty,
whether intentional or not, will be deemed to extend to any prior or subsequent breach, violation or default hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence. No delay or omission on the part of any party in exercising
any right, power, or remedy under this Guaranty will operate as a waiver thereof. The Guaranteed Party shall not release the Other Investor
under the Other Guaranty from any obligations therein or agree to any amendment, supplement, modification or other waiver of any provision
therein without the prior written consent of the Guarantors.
10. Notices.
All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Guaranty shall be
in writing and shall be deemed to have been given (a) when personally delivered, (b) when transmitted via electronic mail to
the applicable e-mail address set out below, in each case before 5:00 p.m., Eastern Time, on a Business Day (so long as no notice of failure
of delivery is received by the sender), (c) the next Business Day following the day on which the same has been delivered prepaid
to a reputable national overnight air courier service, or (d) the third (3rd) Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid. Notices, demands and communications, in each case to the respective parties hereto,
shall be sent to the applicable address set forth below, unless another address has been previously specified in writing by the applicable
party:
If to any Guarantor, to:
Searchlight Capital Partners, L.P.
745 Fifth Avenue, 27th Floor
New York, New York 10151
Attention: Nadir Nurmohamed
Facsimile: 212-207-3837
Email: nnurmohamed@searchlightcap.com
with a copy (which shall not constitute
notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Steven A. Cohen
Victor Goldfeld
Facsimile: (212) 403-2000
Email: SACohen@wlrk.com
VGoldfeld@wlrk.com
If to the Guaranteed Party, as provided
in the Merger Agreement.
11. No
Assignment. This Guaranty and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither this Guaranty nor any of the rights, interests or obligations hereunder may
be assigned (by operation of law or otherwise) or delegated by either the Guarantors or the Guaranteed Party to any other Person without
the prior written consent of the Guaranteed Party (in the case of an assignment by any Guarantor) or each of the Guarantors (in the case
of an assignment by the Guaranteed Party) and any purported assignment without such consent shall be null and void and of no force and
effect, except that if a portion of any Guarantor’s commitment under the Equity Commitment Letter is assigned in accordance with
the terms thereof, then a corresponding portion of the obligations hereunder in respect of the Guaranteed Obligations may be assigned
to the same assignee; provided, however, that notwithstanding any such assignment, each Guarantor shall remain liable to
perform all of its obligations hereunder, except to the extent such obligations are actually paid to the Guaranteed Party by such assignee
(in which case such Guarantor’s Maximum Guarantor Amount and the Maximum Aggregate Amount shall be reduced dollar for dollar by
any amounts so paid).
12. No
Third Party Beneficiaries. This Guaranty is not intended to, and does not, confer upon any Person other than the parties hereto any
rights or remedies hereunder; provided, that Merger Sub, each Related Party of Parent, Merger Sub or any Guarantor and any Related Party
of any such Related Party may rely upon Sections 3 and 6 of this Guaranty as an intended third-party beneficiary.
13. Severability.
Whenever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Guaranty is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions
of this Guaranty; provided, however, that this Guaranty may not be enforced without giving full and absolute effect to the
limitation of the amount payable by the Guarantors hereunder to the Maximum Aggregate Amount and by each Guarantor to its Maximum Guarantor
Amount provided in Section 1 hereof and to the provisions of Section 3, 6 and 12 hereof.
14. Interpretation.
The headings and titles contained in this Guaranty are for convenience purposes only and will not in any way affect the meaning or interpretation
hereof. The parties have participated jointly in negotiating and drafting this Guaranty. If an ambiguity or a question of intent or interpretation
arises, this Guaranty shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provision of this Guaranty.
15. Confidentiality.
This Guaranty shall be treated as strictly confidential and is being provided to the Guaranteed Party solely in connection with the Merger
Agreement and the transactions contemplated thereby. This Guaranty may not be disclosed to any Person or used, circulated, quoted or otherwise
referred to in any document (other than the Merger Agreement, the Equity Commitment Letter, the Other Equity Commitment Letter and the
Other Guaranty), except with the written consent of each Guarantor; provided that each Guarantor and the Guaranteed Party may each disclose
the existence of this Guaranty (a) to its respective Representatives and affiliates if it agrees to cause each such Representative
or affiliate to treat this Guaranty and its contents as confidential, and to cause its directors, officers and advisors to so treat this
Guaranty and its contents as confidential and agrees to be responsible for any breach by any such Representative of such obligations,
(b) to the extent required by applicable Law or stock exchange rule or requirement or in connection with any securities regulatory
agency filings relating to the transactions contemplated by the Merger Agreement, (c) as reasonably necessary in connection with
filings, approvals and rulings to be obtained from any Governmental Authority (it being understood that any such filing may include the
filing of a copy of this Guaranty) or (d) as necessary to enforce any rights pursuant to any proceeding that may arise between or
among any of the parties hereto in respect of this Guaranty.
16. Counterparts.
This Guaranty may be executed in multiple counterparts (and may be delivered by facsimile transmission or via email as a portable document
format (.pdf)), each of which will be deemed an original but all of which together shall constitute one and the same instrument. This
Guaranty will become effective upon its acceptance by the Guaranteed Party, as evidenced by the delivery to each Guarantor of a counterpart
of this Guaranty executed by the Guaranteed Party.
17. Waiver
of Trial by Jury; Governing Law; Consent to Jurisdiction. Sections 9.10, 9.13 and 9.14 of the Merger Agreement are incorporated herein,
mutatis mutandis.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned have duly executed
and delivered this Guaranty as of the date first set forth above.
|
Guarantors: |
|
|
|
Searchlight Capital III, L.P. |
|
|
|
By: |
Searchlight Capital Partners III GP, L.P., |
|
|
its general partner |
|
|
|
By: |
Searchlight Capital Partners III GP, LLC, |
|
|
its general partner |
|
|
|
By: |
/s/ Andrew Frey |
|
Name: Andrew Frey |
|
Title: Authorized Person |
|
|
|
Searchlight Capital III PV, L.P. |
|
|
|
By: |
Searchlight Capital Partners III GP, L.P., |
|
|
its general partner |
|
|
|
By: |
Searchlight Capital Partners III GP, LLC, |
|
|
its general partner |
|
|
|
By: |
/s/ Andrew Frey |
|
Name: Andrew Frey |
|
Title: Authorized Person |
[Signature
Page to Limited Guaranty]
Accepted and Agreed, |
|
|
|
Consolidated Communications Holdings, Inc. |
|
|
|
By: |
/s/ C. Robert Udell, Jr. |
|
|
Name: C. Robert Udell, Jr. |
|
|
Title: President and Chief Executive Officer |
|
[Signature
Page to Limited Guaranty]
Exhibit A
Guarantor |
Maximum Guarantor Amount
(% of Maximum Aggregate
Amount) |
Searchlight Capital III, L.P. |
$13,925,158 (57.08%) |
Searchlight Capital III PV, L.P. |
$10,468,960 (42.92%) |
Total |
$24,394,118 (100%) |
Exhibit 107
CALCULATION OF FILING FEE TABLES
Schedule 13E-3
(Form Type)
Consolidated Communications Holdings, Inc.
Condor Holdings LLC
Condor Merger Sub Inc.
Searchlight III CVL, L.P.
Searchlight III CVL GP, LLC
(Exact Name of Registrant and Name of Persons Filing
Statement)
Table 1: Transaction Valuation
|
Proposed Maximum Aggregate Value of Transaction |
Fee
Rate |
Amount of Filing Fee |
Fees to Be Paid |
$564,771,200.00 (ii)(iii) |
0.00014760 |
$83,360.23 |
Fees Previously Paid |
$0.00 |
|
$0.00 |
Total Transaction Valuation |
$564,771,200.00 |
|
|
Total Fees Due for Filing |
|
|
$83,360.23 |
Total Fees Previously Paid |
|
|
$0.00 |
Total Fee Offsets |
|
|
$83,360.23 |
Net Fee Due |
|
|
$0.00 |
Table 2: Fee Offset Claims and Sources
|
Registrant or Filer
Name |
Form
or
Filing
Type |
File
Number |
Initial Filing Date |
Filing Date |
Fee Offset
Claimed |
Fee Paid
with Fee
Offset
Source |
Fee Offset Claims |
|
PREM
14A |
000-51446 |
November
20, 2023 |
|
$83,360.23 |
|
Fee Offset Sources |
Consolidated Communications Holdings, Inc. |
PREM
14A |
000-51446 |
|
November
20, 2023 |
|
$83,360.23 |
Capitalized terms used below but not defined herein shall have the
meanings assigned to such terms in the Agreement and Plan of Merger, dated October 15, 2023, by and among Consolidated Communication
Holdings, Inc. (the “Company”), Condor Holdings LLC (the “Parent”) and Condor Merger Sub, Inc. (“Merger
Sub”).
(i) |
Title of each class of securities to which the transaction applies: Common stock, par value $0.01 per share, of the Company (the “Company common stock”). |
(ii) |
Aggregate number of securities to which the transaction applies: As of the close of business on November 16, 2023, the maximum number of shares of Company common stock to which this transaction applies is estimated to be 120,164,085, which consists of the following securities that are entitled to receive the per share merger consideration of $4.70: |
|
a. |
113,081,486 issued and outstanding shares of Company common stock; |
|
b. |
1,663,766 additional shares of Company common stock reserved and available for future issuance pursuant to performance share awards if all applicable performance goals are achieved at the maximum level; |
|
c. |
3,406,499 shares of Company common stock underlying restricted share awards; and |
|
d. |
2,012,334 shares of Company common stock underlying performance share awards. |
(iii) |
Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
Solely for the purpose of calculating the filing fee, as of the close
of business on November 16, 2023, the underlying value of the transaction was calculated as the sum of:
|
a. |
the product of 113,081,486 shares of Company common stock entitled to receive the per share merger consideration of $4.70 (the “Merger Consideration”), payable to the holder in cash, without interest, subject to any withholding of taxes required by applicable law, multiplied by the Merger Consideration of $4.70; |
|
b. |
the product of 1,663,766 additional shares of Company common stock reserved and available for future issuance pursuant to performance share awards if all applicable performance goals are achieved at the maximum level multiplied by the Merger Consideration of $4.70; |
|
c. |
the product of 3,406,499 shares of Company common stock underlying restricted share awards, multiplied by the Merger Consideration of $4.70; and |
|
d. |
the product of 2,012,334 shares of Company common stock underlying performance share awards multiplied by the Merger Consideration of $4.70; |
(such sum, the “Total Consideration”).
In accordance with Section 14(g) of the Exchange Act, the
filing fee was determined by multiplying the Total Consideration by 0.00014760.
(iv) |
The Company previously paid $83,360.23 upon the filing of its Preliminary Proxy Statement on Schedule 14A on November 20, 2023 in connection with the transaction reported hereby. |
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