Windstream Deal Leaves Rochester, N.Y., Downtown Development in Limbo

Windstream Corp.'s $2.3 billion deal to acquire Paetec Holding Corp. of Fairport, N.Y., has thrown the nearby city of Rochester for a loop, with plans for a Paetec headquarters downtown now up in the air.

Paetec, which has nearly 900 employees in the Rochester area, pledged in 2007 to build a headquarters on an 8.6-acre plot occupied by an older development called Midtown Tower. As part of the agreement, the state spent about $60 million to purchase the property, remove asbestos and demolish Midtown to make way for the new headquarters. City leaders saw the plan as key to downtown revitalization efforts.

But the Windstream acquisition, which reportedly came as a complete surprise to Rochester, has thrown the future of the project in doubt. Right now, Windstream can't say how many employees it needs in Rochester and won't know until it assesses what the company will look like after absorbing Paetec.

The best case scenario: Windstream establishes a regional center in Rochester, salvaging the building project in some form and maintaining employment levels there in a way that's best for the new company. Paetec CEO Arunas Chesonis, in an interview with WXXI radio in Rochester, hinted as much.

"The conversations I've had with the CEO of Windstream [Jeff Gardner] ... he's told me that their plans are to make Rochester one of their operational centers for the combined company, and over the next four or five months as we approach closing the deal, we'll figure out exactly what roles and responsibilities the different people will have in Rochester compared to the rest of the country," Chesonis said. "And as we go through that process, we'll figure out how much space and what type we need in Rochester."

Windstream spokesman David Avery said the company expects to maintain "a sizable employee presence in the Rochester area," an approach consistent with what happened when Windstream bought NuVox last year and retained its Greenville, S.C., headquarters. Windstream has about 700 workers in Greenville.

As for the Midtown project, Avery said it's too early to say what Windstream will do.

"Arunas is correct that we need to figure our how much office space we will need," he said. Avery also notes that Paetec has a 100,000-SF headquarters in nearby Fairport. The lease on that property ends in 2021.

These things happen when one company buys another. In fact, they've happened in Arkansas. You'll recall the sale of Alltel Corp. of Little Rock to Verizon in 2008, which resulted in a regional headquarters for Verizon in Riverdale.

As for Chesonis, who helped broker the Midtown deal, he won't be part of the combined company. He plans to resign the day after the merger is complete.