Cincinnati Bell to combine with Hawaiian Telcom, OnX Enterprise Solutions

Cincinnati Bell Inc. (NYSE: CBB) has entered into separate definitive merger agreements with Hawaiian Telcom, Inc. (NASDAQ: HCOM) and OnX Enterprise Solutions, the company said.

Cincinnati Bell has signed a definitive agreement to combine with Hawaiian Telcom, the leading integrated communications provider serving the state of Hawai´i, for a total consideration of approximately USD 650 million, representing a 23.7% premium to HCOM´s trailing 20-day calendar VWAP.

Under the agreement, Hawaiian Telcom shareholders will have the option to elect either USD 30.75 in cash, 1.6305 shares of Cincinnati Bell common stock, or a mix of USD 18.45 in cash and 0.6522 shares of Cincinnati Bell common stock for each share of Hawaiian Telcom, subject to proration such that the aggregate consideration to be paid to Hawaiian Telcom shareholders will be 60 percent cash and 40 percent Cincinnati Bell common stock.

Cincinnati Bell has also signed a definitive agreement to acquire OnX Enterprise Solutions, a technology services and solutions provider in North America and the United Kingdom, for a total consideration of approximately USD 201 million in cash on a cash-free, debt-free basis.

The merger with Hawaiian Telcom will combine two companies with complementary values, goals and business strategies, including a shared focus on investment in fiber. The companies also share a commitment to their local communities that stretches back generations, and a mutual desire to provide access to innovative technologies that fuel social and economic development.

This merger will combine Hawaiian Telcom´s 1,300 employees with Cincinnati Bell´s 3,000 to create a bigger and stronger enterprise that will foster greater innovation and deliver more competitive products and services to customers. Cincinnati Bell is committed to Hawaiian Telcom´s workforce and ensuring that it can meet the needs of its customers today and into the future. Also, due to distance and separate operations, this merger is not expected to materially impact jobs in Hawai´i. In fact, Cincinnati Bell has committed to investing in Hawaiian Telcom´s next-generation fiber network statewide, which will create additional opportunities for growth.

Cincinnati Bell and Hawaiian Telcom will retain their names and separate brand identities while sharing best practices and resources to the benefit of both companies. Hawaiian Telcom will continue to be locally managed from Hawai´i and its union labor agreements will be honored.

Hawaiian Telcom will have two seats on the combined company Board and these seats will be held by Hawai´i residents, ensuring that Hawai´i is well represented when broader strategic decisions are made.

With the merger, Cincinnati Bell gains access to both Honolulu, a well-developed, fiber-rich city and the growing neighbor islands. The combination will provide Hawaiian Telcom with expanded liquidity and capital flexibility to continue to expand its next-generation fiber network to enable growth and better serve its customer base statewide.

The companies´ combined fiber networks will exceed 14,000 fiber route miles. In addition, Hawaiian Telcom provides the Company with direct access to the 2.6TB of Trans-Pacific fiber cable capacity linking Asia and the U.S., which expands Cincinnati Bell´s route diversity and gives the combined company exposure to large, data-hungry demographics on both sides of the Pacific.

The acquisition of OnX will expand the company´s footprint to 20+ IT sales offices and provide access to 50+ data centers through strategic partners, significantly increasing Cincinnati Bell´s presence in the US and Canada.

OnX also brings efficiencies and customer diversification, including several Fortune 500 companies. The expansion of Cincinnati Bell´s geographic footprint in IT services, and the Company´s ability to seize upon the growing demand for its enterprise IT solutions and cloud services is a critical element of its refined strategy.

Both transactions are subject to customary regulatory approvals and other customary closing conditions for each transaction. In particular, the Hawaiian Telcom combination is subject to certain federal, state, and local regulatory approvals and approval by Hawaiian Telcom´s shareholders.

The company anticipates the OnX transaction will close in the beginning of the fourth quarter 2017, while the Hawaiian Telcom transaction is expected to close in the second half of 2018. The transactions are not conditioned on each other.

Cincinnati Bell has secured committed financing, subject to customary closing conditions, from Morgan Stanley Senior Funding, Inc., to fund a portion of the cash consideration of the transactions and to refinance Cincinnati Bell and Hawaiian Telcom´s existing debt. Cincinnati Bell´s net leverage (net debt divided by pro forma Adjusted EBITDA) is expected to remain in-line with current levels, including run-rate synergies.

Moelis & Company and Morgan Stanley & Co. LLC are acting as financial advisors to Cincinnati Bell for the Hawaiian Telcom and OnX transactions; Stephens Inc. is also acting as financial advisor for the OnX transaction. Cravath, Swaine & Moore LLP, Morgan, Lewis & Bockius, and BosseLaw, PLLC are serving as legal counsel for both transactions. UBS Investment Bank is acting as financial advisor to Hawaiian Telcom, and Gibson Dunn & Crutcher, LLP is serving as legal counsel. Raymond James & Associates, Inc. is acting as financial advisor to OnX, and Schulte Roth & Zabel LLP is serving as legal counsel.

With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc. (NYSE: CBB) provides integrated communications solutions — including local and long distance voice, data, high-speed Internet and video — that keep residential and business customers in Greater Cincinnati and Dayton connected with each other and with the world. In addition, enterprise customers across the United States rely on CBTS, a wholly-owned subsidiary, for efficient, scalable office communications systems and end-to-end IT solutions.

Hawaiian Telcom (NASDAQ: HCOM), headquartered in Honolulu, is Hawai´i´s Technology Leader, providing integrated communications, broadband, data center and entertainment solutions for business and residential customers. With roots in Hawai´i beginning in 1883, the company offers a full range of services including Internet, video, voice, wireless, data network solutions and security, colocation, and managed and cloud services supported by the reach and reliability of its next generation fiber network and a 24/7 state-of-the-art network operations center.

OnX Enterprise Solutions is a leading technology service and solution provider. The company assesses, designs, builds, secures and manages complete technology environments with specific expertise in cloud and managed services, digital application services and infrastructure solutions. For more than 30 years, OnX has helped clients overcome business challenges and achieve exceptional business results through technology. OnX´s team of more than 500 IT professionals work at OnX offices throughout North America and in the U.K., with global headquarters in Toronto, Canada, and U.S. headquarters in New York, N.Y.