Form 425 -- Employee Letter
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Filed
by Citizens Communications Company pursuant to Rule 425 promulgated
under
the Securities Act of 1933, as amended, and deemed filed pursuant
to Rule
14a-12 promulgated under the Securities Act of 1934, as
amended.
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Subject
Company: Commonwealth Telephone Enterprises, Inc.
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Commission
File No.: 0-11053
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Business
announcement from the Chairman and CEO
September
18, 2006
Hi
everyone,
I
am
writing to let you know that today Citizens Communications has reached an
agreement to acquire Commonwealth for $1.16 billion. This is a great
incremental acquisition
for us,
which will provide us with a logical extension of our existing presence in
Pennsylvania.
Commonwealth
is the eleventh largest local exchange carrier in the U.S. and a leading
provider of telecommunications services to rural markets in Pennsylvania. All
of
its operations are in Pennsylvania, so it’s a great
fit for the business we already have in the state.
We will
be gaining 454,000 rural access lines and 37,000 high-speed customers. Combined,
we will have operations in 23 states, approximately 6,600 employees, and
2,617,000 access lines.
Mike
Mahoney, the CEO of Commonwealth, and the entire management team there have
run
a fantastic company, and we are thrilled to be able to partner with them. The
rich history of Commonwealth and pride in its operations by its employees is
very special. We look forward to building on that rich history and serving
their
communities.
At
this
stage, we are announcing our agreement to acquire Commonwealth, but the
transaction will take some time before it is complete. The deal will need to
be
approved by Commonwealth’s shareholders, as well as the regulators that oversee
Commonwealth’s business. We will keep you updated as we approach the closing
date.
After
the
close, we
intend to roll out our existing suite of products and successful business model
at Commonwealth.
I
believe that by improving in the mix and quality of services currently offered
to Commonwealth’s customers, and building on Commonwealth’s strong reputation
for customer service delivery, we can improve the company’s competitive position
and increase our own revenues and profitability.
We
will
also be initiating an aggressive
outreach campaign to Commonwealth’s current customers.
We want
to introduce our bundled services, sell an increased range of communications
services and increase the number of high-speed Internet subscribers. We will
also increase the focus on sales and marketing to reach new customers in
Pennsylvania.
Financially
this acquisition makes sense
for us
as well. We intend to finance the cash portion of the transaction with a
combination of cash on hand and debt. Citizens has obtained a commitment for
the
financing necessary to complete the acquisition from Citigroup. It is a
wise
use of our resources.
Our
offer is structured as 75% cash and 25% stock. The transaction will maintain
both our balance sheet strength and our commitment to our current $1.00 per
share dividend and a payout ratio less than 70%.
We
also
intend to maximize
operational efficiencies between
the two companies, by leveraging common systems, such as billing, and converting
Commonwealth systems to our
other
standard operating systems where beneficial. We also expect to achieve synergies
from the elimination of Commonwealth’s corporate overhead.
As
you
know, there
is a tremendous amount of consolidation going on in our
industry.
While
making acquisitions has not been our primary strategy for growing the business
since purchasing Frontier in 2001, we
intend to take advantage of opportunities
when,
like Commonwealth, they fit
our strategic acquisition criteria.
Our
focus
will now be on integrating Commonwealth into our company, and I am pleased
that
we
have experienced and talented senior managers to tap
for
integration and leadership. Jake
Casey, Corporate EVP,
who has
led integration teams for us in the past, will lead this integration process.
I
am also delighted to announce that the combined business will be run on a
day-to-day basis by Ken
Arndt,
currently Vice President, Sales and Marketing for the East Region, who will
become Vice President and State General Manager for Pennsylvania upon completion
of the transaction. Commonwealth
will be part of the Central Region and Ken Arndt will report to John Lass,
Senior Vice President and General Manager of the Central Region.
Ken
formerly worked at Commonwealth and brings a strong knowledge of its markets
and
its customers to the table. Ken’s replacement in the East Region will be
announced in the near future.
Since
we
just made this announcement today, and the transaction and will not be finalized
for several months, these are the details I am able to provide you at this
time,
but as we move forward, we will keep you apprised of our progress with continued
updates.
If
you
have any questions or concerns, please do not hesitate to ask your supervisor
or
a member of our human resources team, or you can e-mail your query to
frontier@frontiercorp.com.
You
will
also find the press release and Frequently Asked Questions on The
Link.
Thank
you
for all you do to make our Company a success. It is our collective achievements
that have made today’s announcement possible. I would especially like to express
my gratitude to the management team for their hard work on this acquisition.
Let’s
stay focused on providing quality services for our customers - and soon,
Commonwealth’s as well.
Regards,
Maggie
Maggie
Wilderotter
Chairman
and CEO
FORWARD
LOOKING STATEMENTS
This
material contains forward-looking statements that are made pursuant to the
safe
harbor provisions of The Private Securities Litigation Reform Act of 1995.
These
statements are made on the basis of management’s views and assumptions regarding
future events and business performance. Words such as “believe”, “anticipate”,
“expect”, and similar expressions are intended to identify forward-looking
statements. Forward-looking statements (including oral representations) involve
risks and uncertainties that may cause actual results to differ materially
from
any future results, performance or achievements expressed or implied by such
statements. These risks and uncertainties are based on a number of factors,
including, but not limited, to: our ability to complete the acquisition of
Commonwealth, to successfully integrate their operations and to realize the
synergies from the acquisition; changes in the number of our revenue generating
units; greater than anticipated competition from wireless or wireline carriers;
general and local economic and employment conditions; our ability to effectively
manage our operations, costs and capital spending; our ability to successfully
introduce new product offerings including bundled service packages; our ability
to sell enhanced services; changes in accounting policies or practices; changes
in regulation in the communications industry; our ability to manage our
operating expenses, capital expenditures, pay dividends and reduce or refinance
our debt; adverse changes in the ratings of our debt securities; bankruptcies
in
the telecommunications industry; the effects of technological changes and
competition on our capital expenditures and product and service offerings;
increased medical, retiree and pension expenses; changes in income tax rates
and
tax laws; our ability to successfully renegotiate expiring union contracts;
and
general factors, including changes in economic, business and industry
conditions. These and other uncertainties related to our business are described
in greater detail in our filings with the Securities and Exchange Commission,
including our reports on Form 10-K and 10-Q. We undertake no obligation to
publicly update or revise any forward-looking statement or to make any other
forward-looking statements, whether as a result of new information, future
events or otherwise unless required to do so by securities laws.
ADDITIONAL
INFORMATION AND WHERE TO FIND IT
This
material is not a substitute for the prospectus/proxy statement Citizens
Communications Company and Commonwealth Telephone Enterprises, Inc. will file
with the Securities and Exchange Commission. Investors are urged to read the
prospectus/proxy statement which will contain important information, including
detailed risk factors, when it becomes available. The prospectus/proxy statement
and other documents which will be filed by Citizens Communications Company
and
Commonwealth Telephone Enterprises, Inc. with the Securities and Exchange
Commission will be available free of charge at the SEC’s website, www.sec.gov,
or by directing a request when such a filing is made to Citizens Communications
Company, 3 High Ridge Park, Stamford, CT 06905, Attention: Investor Relations;
or to Commonwealth Telephone Enterprises, Inc., 100 CTE Drive, Dallas,
Pennsylvania 18612, Attention: Investor Relations. The final prospectus/proxy
statement will be mailed to shareholders of Commonwealth Telephone Enterprises,
Inc.
This
communication shall not constitute an offer to sell or the solicitation of
an
offer to buy securities, nor shall there be any sale of securities in any
jurisdiction in which such offer,
solicitation
or sale would be unlawful prior to registration or
qualification under the securities laws of such jurisdiction.
Citizens
Communications Company and Commonwealth Telephone Enterprises, Inc., and certain
of their respective directors, executive officers and other members of
management and employees are participants in the solicitation of proxies in
connection with the proposed transactions. Information about the directors
and
executive officers of Citizens Communications Company is set forth in the proxy
statement for Citizens Communications Company’s 2006 annual meeting of
shareholders. Information about the directors and executive officers of
Commonwealth Telephone Enterprises, Inc. is set forth in the proxy statement
for
Commonwealth Telephone Enterprises, Inc.’s 2006 annual meeting of shareholders.
Investors may obtain additional information regarding the interests of such
participants in the proposed transactions by reading the prospectus/proxy
statement for such proposed transactions when it becomes available.