Shentel To Buy Ntelos, End Awkward, Unpronounceable Name

After months of ‘will they or won’t they’ and having its stock whipsawed as a result of buyout rumors, Ntelos (NTLS) announced that it would be acquired by fellow Mid-Atlantic region focused operator Shenandoah Telecommunications (SHEN). Shentel, as it is known, is paying $640m for the company, much of it in the form of assumed debt. NTLS shareholders will receive $9.25 per share, representing a hefty premium to recent prices. Shentel also announced some new agreements to expand its relationship with Sprint, including the transition of many of Ntelos customers to Sprint.

After the close, Ntelos’ brand will be discontinued, marking an end to its independence and its existence. The company spun off its wireline business into Lumos Networks (LMOS) back in 2011 in order to focus on the wireless business and its retail customers. From the time of the spinoff, buyout rumors swirled around both companies, with most expecting Sprint(S) to pick up Ntelos. Unfortunately, things didn’t quite go as planned. The industry became much more competitive which didn’t help. It also carried a hefty debt load in order to pay sizable dividends and eventually, it was forced to cut its payments (and make some other strategic changes) after renegotiating its contract with Sprint. Customer concentration risk can be a rough one. Ntelos is currently in the process of unloading its Eastern Virginia customers and that is expected to be completed later this year.

Despite scoring some initial gains, the stock has languished recently until the buyout rumors surfaced. Although the sizable premium may cause excitement to some shareholders, the takeover price of $9.25 still represents a sizable loss for holders at the spin. Shentel shares soared yesterday so it seems investors like the move. The deal is expected to close in early 2016 and both boards approved the deal. Quadrangle, which owns 18% of NTLS shares, indicated they would support the deal as well so this shouldn’t have any issues on that front.

Disclosure: Author owns shares of NTLS