US Lec (CLEC) agreed to merge with closely held Paetec of Fairport, N.Y.
Based in Charlotte, N.C., US Lec said Paetec holders will own two-thirds of the combined company and US Lec holders the rest. US Lec shareholders will get a share in the new company for each share held, valuing the transaction at $147 million for them.
The companies will finance the transaction through a combination of debt and cash on hand. US Lec agreed to repurchase its outstanding Series A Preferred Stock, held by Bain Capital and Thomas H. Lee Partners LP, at a price that reflects a $30 million discount to its accreted value (approximately $268 million as of Dec. 31, 2006, net of discount). Upon closing, this repurchase would eliminate US Lec's Convertible Preferred Stock due April 2010.