Little Rock telecom firms Uniti Group Inc. (Nasdaq: UNIT) and Windstream Holdings Inc. on Friday announced a $13.4 billion merger that will reunite the companies after nearly a decade.
In a news release, Windstream said the transaction will combine Uniti’s national wholesale-owned fiber network with Windstream’s fiber-to-the-home business, Kinetic, to “create a premier insurgent fiber provider in the U.S.” with about $4 billion in revenue and $8 billion in corporate debt. The combined company will initially serve over 1.1 million customers and 1.5 million existing homes, with a particularly strong presence in the Midwest and Southeast.
The combined company, which will keep the Uniti name and remain in Little Rock, will be led Kenny Gunderman, Uniti’s CEO, and Paul Bullington, Uniti’s CFO.
“We look forward to working with Windstream to create a national fiber powerhouse that will continue to bridge the digital divide for our customers,” Gunderman said in a statement.
The merger is expected to close in the second half of 2025. Together, the companies will have 217,000 fiber route miles across 47 states.
Shareholders of publicly traded Uniti will receive approximately 62% of the outstanding common equity of the combined company.
Windstream shareholders will receive $425 million of cash, $575 million of preferred equity in the new combined company, and common shares representing approximately 38% of the outstanding common equity of the combined company. Uniti expects to fund the $425 million of cash consideration to shareholders of Windstream from operations, revolver borrowings and/or future capital markets transactions.
Uniti, a tower owner that operates as a real estate investment trust, spun off of Windstream in 2015 but the companies remained connected. Windstream is Uniti‘s largest customer and tenant under a master lease agreement.
In a call with investors Friday morning, Uniti officials said the merger will resolve inefficiencies in the firms’ landlord-tenant relationship, though the lease agreement will remain in place.
Gunderman said Uniti will not maintain corporate status as a real estate investment trust after the merger but might restructure some its subsidiaries to qualify as REITs for tax purposes.
Some of Windstream’s largest shareholders, including private investment firm Elliott Management, which also holds some of Uniti’s equity and debt, will be rolling substantially all of their investment value in Windstream into the combined company, according to the news release. Elliott Management is the majority owner of Nexus Aggregator, which acquired a 49.27% interest in Windstream last year as part of Windstream’s Chapter 11 bankruptcy reorganization.
The combined company’s board will expand from five to nine members. Two of the new directors will be chosen by Elliott Management. The other two will be jointly selected by Elliott and Uniti.
In a statement, Elliott said, “As one of the largest investors in both Uniti and Windstream, we are pleased to support this combination, which has a compelling strategic rationale and creates a significant opportunity for enhanced value creation.”
Shares of Uniti fell 17% Friday morning to $4.98. Year to date, shares were down about 15%.
Q1 results
Uniti on Friday reported first-quarter net income of $40.9 million, swinging to profitability from a $19.45 million loss in the same period a year ago.
Per share, earnings came to 16 cents.
Funds from operations — a closely watched measure in the REIT industry — totaled $87.6 million, or 32 cents per share, in the quarter. The figure was down 18.4% from $107.4 million the previous year and below Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for funds from operations of 35 cents per share.
Revenue dipped 1.2% in the period from $289.8 million to $286.4 million, falling short of Street forecasts. Three analysts surveyed by Zacks expected $287.3 million.
In a statement, Gunderman said the company’s core fiber business grew 4% in the first quarter while reducing net capital expenditures.
“These metrics further reiterate that our lease-up strategy continues to be successful,” he said. “We also continue to see increasing demand from bandwidth intensive applications like Generative AI further reinforcing the mission critical nature of fiber.”
Uniti raised its outlook for 2024, upping projected net revenue from $1.154 billion to $1.174 billion. Projected net income was increased from $116 million to $136 million. Funds from operations, first projected at $319 million, is now expected to reach $339 million.
The updated outlook excludes any impact from the merger with Windstream.
The Associated Press contributed information to this report.
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