Windstream Buys Hosted Solutions for $310M

Broadband Internet specialist Windstream Corp. (WIN) has entered into a definitive agreement with ABRY Partners to acquire managed hosting provider Hosted Solutions in an all-cash transaction valued at $310 million.

Hosted Solutions started life as a local provider focused on the Research Triangle area of North Carolina, with headquarters in Cary and a data center in Raleigh. The company expanded into Boston in 2006, and in 2009 was acquired by ABRY Partners, which invested in upgrades for five data centers located along the East Coast. Hosted Solutions is based in Raleigh, N.C., and has more than 600 customers and has approximately 125 employees

Deal Will 'Transform' Windstream
Windstream said the acquisition of Hosted Solutions will "transform" its data center business, adding data centers in Raleigh, Charlotte and Boston with a total of 68,000 square feet of data center capacity. That gives Windstream a combined total of 12 data centers across the country.

"Data center space is increasingly in demand among our existing business customers," said Jeff Gardner, president and chief executive officer of Windstream. "Hosted Solutions is an excellent complement to our existing enterprise service portfolio. For the past decade, they have been delivering highly complex managed hosting solutions to customers of various sizes. In addition, they have a proven track record of growing revenue and generating significant free cash flow.”

Windstream expects to finance the transaction with existing liquidity through cash reserves and revolving credit capacity. Windstream estimates the transaction will be accretive to free cash flow in the first year following the closing after expected annual synergies of approximately $1.5 million in operating expense savings and excluding integration charges.

The boards of both companies have approved the transaction, which is expected to close in the fourth quarter of 2010, subject to certain conditions, including necessary regulatory approvals.