Primus Telecommunications Group, Incorporated (OTCBB: PMUG), a
global facilities-based integrated provider of advanced
telecommunications products and services, announced today that it
has entered into a definitive merger agreement to acquire Arbinet
Corporation (NASDAQ: ARBX), a leading provider of wholesale telecom
exchange services to carriers, for $28 million in an all-stock
transaction. The Boards of Directors of both companies have
approved the merger, which is subject to regulatory approvals, the
approval of the stockholders of both companies and certain other
conditions. The transaction is expected to close in the first
quarter of 2011.
Following closing, Primus will integrate Arbinet into Primus'
Global Wholesale group, which should add over $300 million in
annual revenue and generate accretive cost synergies of $3 million
to $7 million in each of the next two years. On a pro forma basis,
Primus' Wholesale business unit is expected to generate over $500
million in annual revenue, and bring Primus' total consolidated
annual run rate revenue to over $1 billion.
Peter D. Aquino, Chairman, President and Chief Executive
Officer, stated, "Primus' new management team is focused on
improving the company's operations, which in our view begins with
making important decisions about where we can be most successful
over the long term. Given that scale is critical in the wholesale
business, we made the strategic decision to add Arbinet's
thexchange(SM) and complementary international route capabilities,
which we expect will benefit our combined international carrier
customers as they look to outsource their wholesale needs to
players of size. This acquisition not only adds scale, but allows
us to mitigate cost overlaps and is expected to allow us to realize
significant synergies over time. We expect this to be a win for our
customers and employees, and to generate additional value for
stockholders."
The combination of Primus' Global Wholesale business with
Arbinet should enhance global competitive positioning by allowing
customers to access more global routes at competitive rates and
diversifies the product portfolio of international voice and data
services across all existing customer segments. Primus will become
the only major global provider to offer customers options either to
acquire direct international connections through traditional
interconnect arrangements or to manage their access needs through
Arbinet's voice trading exchange (thexchange(SM)).
Shawn O'Donnell, President and Chief Executive Officer of
Arbinet, stated, "Arbinet's Board examined a range of strategic
alternatives and, after a careful review, concluded that our merger
with Primus is the best available option for our stockholders. As
an all-stock transaction, this combination provides Arbinet
stockholders the opportunity to participate in the upside potential
of the combined company. In sum, we have found a strong partner in
Primus with a complementary business, outstanding reputation and
shared values, and we believe Arbinet will thrive as part of the
Primus family."
The company expects that the combination will improve gross
margins and resulting EBITDA by eliminating operating redundancies
and adding the benefits of increased scale by:
- Enhancing Primus' direct voice carrier services product
portfolio with additional options to use the thexchange(SM), the
world's largest online wholesale voice marketplace offering
anonymous, automated traffic routing, trading and settlement
- Adding enhanced global voice and data services, including IP
transit and peering
- Combining complementary strengths, including an expanded global
footprint, additional sales presence, and increased coverage in
Asia, Latin America, and Eastern Europe.
Under the terms of the merger agreement, Arbinet common
stockholders will receive shares of Primus common stock in exchange
for shares of Arbinet common stock they own in a stock-for-stock
transaction valued at $28 million. One of Primus' and Arbinet's
principal stockholders has entered into share support agreements to
vote its shares of both Primus and Arbinet in favor of the
merger.
Houlihan, Lokey, Howard and Zukin acted as financial advisors to
Primus in connection with the Arbinet merger.
Separately, Primus has engaged Akira Partners UK Ltd to conduct
a process to sell certain assets in the United Kingdom, France,
Belgium, Italy. Primus has also worked to sell assets in other
European countries. To date, the sales of the UK, Belgium, Spain,
Sweden, Switzerland and Italy operations are closed.
Peter D. Aquino continued, "In addition to the tuck-in Arbinet
transaction, the Primus team has been very active in evaluating the
merits of retaining or divesting certain sub-scale businesses and
has taken immediate action to sell or discontinue retail operations
in Europe. The aggregate net cash proceeds for European businesses
sold to date are approximately $7 million, every dollar of which
counts towards our cash balance. We are committed to keeping all of
our options open with respect to evaluating Primus' strategic
alternatives, to proceeding with this process in the coming months
to help unlock the value of the sum of the parts of the Primus
portfolio, and to seeking ways to accelerate the transformation of
our balance sheet."
Primus will provide further discussion of these transactions on
its third quarter 2010 conference call to be held November
16th.
About Primus Primus Telecommunications
Group, Incorporated is a leading provider of advanced communication
solutions, including, traditional and IP voice, data, mobile
services, broadband Internet, collocation, hosting, and outsourced
managed services to business and residential customers in the
United States, Canada, Australia, and Brazil. Primus is also one of
the leading international wholesale service providers to fixed and
mobile network operators worldwide. Primus owns and operates its
own global network of next-generation IP soft switches, media
gateways, hosted IP/SIP platforms, broadband infrastructure, fiber
capacity, and data centers located in Canada, Australia, and
Brazil. Founded in 1994, Primus is headquartered in McLean,
Virginia.
About Arbinet Arbinet is a leading
provider of international voice, data and managed communications
services for fixed, mobile and wholesale carriers. With more than
1,200 carrier customers across the globe connected to Arbinet's
network, Arbinet combines global scale with sophisticated platform
intelligence, call routing and industry leading credit management
and settlement capabilities. Arbinet offers these communication
services through three primary product offerings including a
thexchange(SM), Carrier Services and PrivateExchange(SM). Arbinet's
thexchange(SM) platform, the largest online wholesale voice trading
exchange, continues to provide customers with access to a neutral
marketplace to buy and sell global voice and data traffic. Arbinet
owns and operates a global network of next generation IP soft
switches, media gateways, IP transport and co-location centers
located in the United States, United Kingdom, Hong Kong, Frankfurt
and Miami. Founded in 1997, Arbinet is headquartered in Herndon,
Virginia.
Non-GAAP Financial Measures This release
includes certain non-GAAP financial measures as defined under SEC
rules, which include Adjusted EBITDA and Free Cash Flow. PRIMUS
provides reconciliations of these measures to the most directly
comparable GAAP measures in its press releases, which are available
on our website at www.primustel.com. Additionally, information
regarding the purpose and use for these non-GAAP financial measures
is set forth in the Company's quarterly press releases and filings
made with the SEC, which are available on our website.
Important Information and Where to Find It
In connection with the proposed merger, Primus Telecommunications
Group, Incorporated ("Primus") will file with the Securities and
Exchange Commission ("SEC") a Registration Statement on Form S-4
that will include a preliminary proxy statement of Primus and
Arbinet Corporation ("Arbinet") that also constitutes a preliminary
prospectus of Primus. A definitive joint proxy statement/prospectus
will be sent to security holders of both Arbinet and Primus seeking
their approval with respect to the proposed merger. Primus and
Arbinet also plan to file other documents with the SEC regarding
the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED
TO CAREFULLY READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security
holders may obtain a free copy of the joint proxy
statement/prospectus (when it becomes available) and other
documents filed by Primus and Arbinet with the SEC, without charge,
at the SEC's web site at www.sec.gov. Copies of the joint proxy
statement/prospectus, once available, and each company's SEC
filings that will be incorporated by reference in the joint proxy
statement/prospectus may also be obtained for free by directing a
request to: (i) Primus 703-748-8050, or (ii) Arbinet (Andrea
Rose/Jed Repko Joele Frank, Wilkinson Brimmer Katcher (212)
355-4449).
Participants in the Solicitation Arbinet,
Primus, and their respective directors, executive officers and
other members of their management and employees may be deemed to be
"participants" in the solicitation of proxies from their respective
security holders in connection with the proposed merger. Investors
and security holders may obtain information regarding the names,
affiliations and interests of Primus's directors, executive
officers and other members of its management and employees in
Primus's Annual Report on Form 10-K for the year ended December 31,
2009, which was filed with the SEC on April 5, 2010, and amended in
a Form 10-K/A filed with the SEC on April 28, 2010, Primus's proxy
statement for its 2010 annual meeting, which was filed with the SEC
on June 14, 2010, and any subsequent statements of changes in
beneficial ownership on file with the SEC. Investors and security
holders may obtain information regarding the names, affiliations
and interests of Arbinet's directors, executive officers and other
members of their management and employees in Arbinet's Annual
Report on Form 10-K for the year ended December 31, 2009, which was
filed with the SEC on March 17, 2010, Arbinet's proxy statement for
its 2010 annual meeting, which was filed with the SEC on April 30,
2010, and any subsequent statements of changes in beneficial
ownership on file with the SEC. These documents can be obtained
free of charge from the sources listed above. Additional
information regarding the interests of these individuals will also
be included in the joint proxy statement/prospectus regarding the
proposed transaction when it becomes available.
Forward-Looking Statements This press
release includes "forward-looking statements" as defined by the
Securities and Exchange Commission. All statements, other than
statements of historical fact, included herein that address
activities, events or developments that Arbinet or Primus expects,
believes or anticipates will or may occur in the future, including
anticipated benefits and other aspects of the proposed merger, are
forward-looking statements. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. Risks and uncertainties that could affect
forward-looking statements include, but are not limited to, the
following: the risk that the acquisition of Arbinet may not be
consummated for reasons including that the conditions precedent to
the completion of the acquisition may not be satisfied; the
possibility that the expected synergies from the proposed merger
will not be realized, or will not be realized within the
anticipated time period; the risk that Primus's and Arbinet's
businesses will not be integrated successfully; the possibility of
disruption from the merger making it more difficult to maintain
business and operational relationships; any actions taken by either
of the companies, including, but not limited to, restructuring or
strategic initiatives (including capital investments or asset
acquisitions or dispositions); the ability to service substantial
indebtedness; the risk factors or uncertainties described from time
to time in Arbinet's filings with the Securities and Exchange
Commission; and the risk factors or uncertainties described from
time to time in Primus's filings with the Securities and Exchange
Commission (including, among others, those listed under captions
titled "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources --
Short- and Long-Term Liquidity Considerations and Risks;" "--
Special Note Regarding Forward-Looking Statements;" and "Risk
Factors" in Primus's annual report on Form 10-K and quarterly
reports on Form 10-Q) that cover matters and risks including, but
not limited to: (a) a continuation or worsening of global
recessionary economic conditions, including the effects of such
conditions on our customers and our accounts receivables and
revenues; (b) the general fluctuations in the exchange rates of
currencies, particularly any strengthening of the United States
dollar relative to foreign currencies of the countries where we
conduct our foreign operations; (c) the possible inability to raise
additional capital or refinance indebtedness when needed, or at
all, whether due to adverse credit market conditions, our credit
profile or otherwise; (d) a continuation or worsening of turbulent
or weak financial and capital market conditions; (e) adverse
regulatory rulings or changes in the regulatory schemes or
requirements and regulatory enforcement in the markets in which we
operate and uncertainty regarding the nature and degree of
regulation relating to certain services; and (f) successful
implementation of cost reduction efforts. Readers are cautioned not
to place undue reliance on forward-looking statements, which speak
only as of their dates. Except as required by law, neither Arbinet
nor Primus intends to update or revise its forward-looking
statements, whether as a result of new information, future events
or otherwise.
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