8-KOther Events

VERIZON COMMUNICATIONS INC 8-K Report, Corporate Update (Jan 16, 2007)

Filed January 16, 2007For Securities:VZ

Summary

Verizon Communications Inc. announced a significant strategic divestiture of its local exchange and related business assets in Maine, New Hampshire, and Vermont. These operations, which include switched and special access lines, internet service, and certain voice and private line customer accounts, will be spun off to Verizon stockholders as a separate entity and then immediately merged with FairPoint Communications, Inc. This transaction aims to streamline Verizon's operations by focusing on its core businesses, while providing FairPoint with a substantial expansion opportunity in the Northeast. The deal is valued at approximately $2.715 billion. Verizon stockholders are expected to receive approximately 60% ownership of the new combined entity, with FairPoint stockholders holding the remaining 40%. Verizon will receive $1.7 billion in cash and debt securities, with an option to reduce its own outstanding debt by exchanging these securities. This move is designed to be a tax-free transaction for Verizon stockholders, except for any cash received in lieu of fractional shares, and is anticipated to close within 12 months, pending regulatory and stockholder approvals.

Key Highlights

  • 1Verizon is divesting its local exchange and related business assets in Maine, New Hampshire, and Vermont.
  • 2These assets will be spun off into a new entity and then merged with FairPoint Communications, Inc.
  • 3The transaction is valued at approximately $2.715 billion.
  • 4Verizon stockholders are expected to own approximately 60% of the combined entity post-merger.
  • 5Verizon will receive $1.7 billion through cash and debt securities, with potential for debt reduction.
  • 6The transaction is anticipated to be tax-free for Verizon stockholders (excluding cash for fractional shares).
  • 7The deal is expected to close within the next 12 months, subject to approvals.

Frequently Asked Questions

Verizon is selling its switched and special access lines, internet service, enterprise voice customer premises equipment (CPE) accounts, and long-distance voice and private line customer accounts (within the three states) that were part of its operations before the MCI merger. Importantly, Verizon Wireless and Verizon Business (former MCI) assets are NOT included in this transaction.

Verizon stockholders are expected to own approximately 60% of the new company formed by the merger of Verizon's divested assets with FairPoint. They will receive shares in this new entity, representing their ownership stake, in a transaction intended to be tax-free.

Verizon is receiving approximately $2.715 billion in total value. This includes $1.7 billion in cash and debt securities, which could potentially be used to reduce Verizon's outstanding debt. The remaining value is reflected in the equity stake Verizon stockholders will hold in the new combined company.

The transaction is subject to several conditions, including approval from FairPoint stockholders, necessary state and federal regulatory approvals, and other customary closing conditions. The completion is expected within the next 12 months.