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TelePacific to Buy Mpower for $204 Million

California-based CLEC TelePacific Communications is buying Mpower Communications Corp.

TelePacific, which is privately held, will pay approximately $204 million, or $1.92 in cash, per Mpower share. The deal will be financed by Credit Suisse and Bank of America, and is expected to close in the third quarter.

TelePacific traditionally has served California and the Las Vegas markets; acquiring Mpower strengthens its California and Nevada coverage, and expands its reach to parts of Illinois, where Mpower is headquartered. Mpower owns fiber and colocation facilities throughout its footprint. TelePacific said it will use the fiber-optic assets to expand its wholesale private line services.

The merger will make TelePacific one of the largest CLECs in the Western United States.

“Consolidation is positive,” TelePacific President and CEO Dick Jalkut said earlier this year at the Channel Partners Conference & Expo in Las Vegas. He said the stronger competitive carriers become, the more they appeal to the market the RBOCs overlook the small and medium enterprise. That same strategy was in place in deciding to buy Mpower, TelePacific noted.

Mpower has an outstanding network, great employees and a strong record in terms of product innovation and quality of services, Jalkut said in a news release. These strengths, added to those of TelePacific, will improve our ability to provide advanced, high-quality telecommunications services to a broader range of customers and increase the growth opportunities available to us. Along with the numerous customer benefits, we believe the proposed transaction will yield substantial financial benefits from synergies for its investors.”

Jalkut will remain as head of the combined company. Rolla Huff, chairman and CEO of Mpower, has been offered a position on the board of the combined companies, but has not yet said what he will do, Mpower said.

TelePacific was advised by Brown Brothers Harriman & Co. and Credit Suisse. Gibson, Dunn & Crutcher LLP provided legal counsel. Morgan Stanley, Evercore Partners and Shearman & Sterling LLP advised Mpower.

Mpower stocks were down 3 cents at $1.84 during early afternoon trading today on the American Stock Exchange.

Mpower Communications www.mpowercom.com
TelePacific Communications www.telepacific.com


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