Based in Little Rock, Ark., Windstream is a rural landline telephone company that expanded into business and broadband services through acquisitions. The new business will contain Windstream's fiber and copper networks, as well as real estate.
Check out who TheStreet's Jim Cramer thinks will benefit from Windstream's spinoff:
The spun off entity will take on $3.5 billion in debt, and the parent said it will pay off $3.2 billion in its debt via the transaction. The REIT will lease the network to Windstream, with the annual rent starting at $650 million.
"This is a very confusing transaction," Wells Fargo Securities (WFC) analyst Jennifer Fritzsche wrote in a Tuesday report. "However, we see this as a positive for [Windstream] shares." The deal would simplify the focus of the business and the capital structure, she wrote.
Windstream stock gained $2.47, to $13.00 on Tuesday. Fellow landline network provider Frontier Communications rose 92 cents, or 15.5%, to $6.86 per share. CenturyLink gained $3.26, or 8.6%, to $40.97. CenturyLink rose as high as $45.67.
The incumbent telecoms have used M&A and other transactions to drive growth and support their dividends.