Yesterday, the board of directors of Windstream Holdings Inc. WIN gave the final approval for the tax-free spin-off of select telecommunications network assets of the company to become an independent publicly traded real estate investment trust (REIT).
The new company will be called Communications Sales & Leasing Inc. and will trade on Nasdaq under a ticker symbol of “CSAL”. Additionally, the board h declared a prorated cash dividend subject to the closing of the spinoff.
Windstream will distribute approximately 80.1% of CSAL shares on Apr 24, 2015, to Windstream shareholders of record as of Apr 10, 2015. The company will retain around 19.9% outstanding shares of CSAL for the next 12 months following the spinoff to reduce debt.
Moreover, Windstream will make a cash distribution equivalent to a prorated $0.25 quarterly dividend to Windstream shareholders of record as of Apr 10, 2015. Assuming that the spin-off will close on Apr 24, 2015, the cash dividend would be $.0659, and the company will make the payment on Apr 24, 2015.
In terms of infrastructural development, with the new spin-off, the company aims to offer faster broadband speeds and more robust performance to its consumers. The financial synergies arising from the divestiture will allow the company to expand the availability of 10 Mbps Internet service to more than 80% of its customers by 2018.
The divestment of assets will involve fiber and copper networks and other real estates of Windstream, owned by REIT, which in turn will lease assets to Windstream under a triple-net exclusive lease arrangement for the long term with an initial estimated rent payment of $650 million per year. Hence, Windstream can make use of these assets to deliver advanced services.
Zacks Rank & Stocks to Consider
Windstream currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include CenturyLink Inc. CTL, Telenav Inc. TNAV and United States Cellular Corp. USM. All three stocks currently carry a Zacks Rank #2 (Buy).
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