NuVox, NewSouth announce merger plans

|tab|

by Eric Olson|ret||ret||tab|

SBJ Reporter|ret||ret||tab|

eolson@sbj.net|ret||ret||tab|

|ret||ret||tab|

Two privately held communications companies that cater to businesses, one with a presence in Springfield, are joining forces in what is being called a merger of equals.|ret||ret||tab|

St. Louis-based NuVox Communications Inc., with an office at 1523 E. Lark, and NewSouth Holdings Inc. of Greenville, S.C., signed a definitive agreement Feb. 25 combining the two companies as NuVox Communications. The new company would have 36,000 customers and more than 500,000 access lines in service among 58 markets in 16 Midwest and southeast states.|ret||ret||tab|

The deal, a pure stock swap, is expected to close in May, pending regulatory and stockholder approval. Private investors hold ownership in both companies, including equity investors Goldman Sachs, JPMorgan Partners, Norwest Equity Partners and Wachovia Capital Partners.|ret||ret||tab|

NuVox and NewSouth are facilities-based communications providers of local, long-distance, Internet and advanced communications services to small- to medium-sized business customers. But the similarities run much deeper, from revenues and debt to customers and employees, according to company officials.|ret||ret||tab|

"We were virtually identical in financials," said Dale Kammerich, regional director in Springfield. "In this case, it's truly a merger of two equals."|ret||ret||tab|

Each company has approximately $150 million in annualized revenues from 18,000 customers. Cash on hand would total $70 million, a $30 million (NuVox)-$40 million (NewSouth) split, versus a combined $80 million in debt. Employee counts also mirror each other: about 800 for NuVox and 700 for NewSouth.|ret||ret||tab|

Kammerich said such equality in a merger is uncommon in a telecommunications industry that has witnessed numerous consolidations in recent years due to high debt accrual.|ret||ret||tab|

"This is an industry that has struggled over the last three years," Kammerich said. "As we look across our landscape, we have seen some consolidation."|ret||ret||tab|

Most recently, Virginia-based XO Communications acquired bankrupt Allegiance Telecom of Dallas in February, and once-bankrupt ITC DeltaCom Inc. and BTI Telecom Corp. merged last fall. Both deals involved high amounts of debt.|ret||ret||tab|

Kammerich feels that NuVox and NewSouth have been able to "weather that storm. It has truly been a survival-of-the-fittest marketplace," he said. "There's no secret formula: it's been taking care of customers and to continue to focus on growth while doing that."|ret||ret||tab|

NuVox serves nearly 900 customers from the Springfield office, including Aire-Master of America, Federal Protection Inc., Hood-Rich Inc., Ollis & Company and Reliable Chevrolet. The local office has grown customer accounts 28 percent annually for the past three years, Kammerich said.|ret||ret||tab|

|ret||ret||tab|

Local impact|ret||ret||tab|

Local customers should not expect changes to rates, contract terms or service agreements as a result of the merger.|ret||ret||tab|

"It's not going to impact that. It will enhance the services that we offer, and we'll offer services in more cities," Kammerich said. |ret||ret||tab|

"Once we're a combined company we'll get into the business of combining our product portfolio."|ret||ret||tab|

The merger creates a multiregional company with a larger footprint, something company officials say could benefit existing clients with multiple locations.|ret||ret||tab|

"An example would be a customer in Springfield that also has a site in two of the other cities we are not serving today, then we could pick those locations up too," said Bill Whitworth, sales manager. "We provide a lot of multilocation type customers."|ret||ret||tab|

The company has not yet identified which customers may be affected in that way.|ret||ret||tab|

It is the second merger for NuVox. The company merged with TriVergent Communications, another Greenville, S.C.-based company, in 2001.|ret||ret||tab|

"The reason this makes sense, when you combine two companies that are both in their own right healthy and on a growth path, (is) it enhances the areas that we can provide services for our customers," Kammerich said.|ret||ret||tab|

"And, ultimately, it's going to enhance our product mix."|ret||ret||tab|

Regulators with the Federal Communications Commission, the Department of Justice and public service commissions in the affected states have yet to approve the merger.|ret||ret||tab|

NuVox chairman and CEO David Solomon will continue as chairman of the combined company, while Jim Akerhielm, NewSouth president and CEO, will serve as CEO.|ret||ret||tab|

[[In-content Ad]]