MTS to Sell Allstream to Zayo in an all cash Transaction for $465 Million

Proposed Transaction Structured To Maximize Both Value and Deal Certainty; Zayo Purchase Brings New Competitive Strength to Canadian Telecom Market

TORONTO AND WINNIPEG – November 23, 2015 – Manitoba Telecom Services Inc. (TSX: MBT), the “Company”, including its two primary operating subsidiaries, MTS Inc. (MTS) and Allstream Inc. (Allstream), today announced it has signed a binding agreement to sell Allstream to Zayo Group Holdings Inc. (“Zayo”), a leading provider of communication infrastructure in an all cash transaction for $465 million.

“This transaction is the outcome of a comprehensive process which left no stone unturned,” said Jay Forbes, President and CEO. “We engaged with a variety of potential strategic and financial buyers in a very orderly process. We believe this transaction maximizes the value of a stabilized and renewed Allstream, is in the best interests of the Company, and positions both MTS and Allstream for long term success in a competitive telecom marketplace.”

“We are delivering on our complete turnaround and planned exit from Allstream, with the value of the business fully recognized through a sale process we feel confident has a high certainty of closing,” added Mr. Forbes. “The acquisition by Zayo represents a new beginning for Allstream and a significant new evolution in the competitive landscape of Canadian telecoms.”

MTS will be in a stronger position to transform into a more customer-first business, leveraging its tremendous assets and unique position to deliver solid results in a competitive market. “We have a new team, a new strategy and a new future,” said Mr. Forbes. “We have made strong progress in 2015 executing on our strategy, resulting in significantly improved free cash flow generating capability, with plans for $100 million in further free cash flow improvements over the next three years.”

The transaction is subject to certain closing adjustments, including normalized working capital, as well as certain pension related obligations described below. The transaction has been approved by the MTS Board of Directors and is expected to close in the first quarter of 2016. The transaction is subject to important regulatory approvals, including national security approval and Competition Bureau approval, as well as customary closing conditions.

SALE PROCESS

The Allstream sale process was thorough, with a large number of potential buyers resulting in multiple bids for consideration.

Throughout the sale process the Company held discussions with relevant regulatory stakeholders which we believe will help facilitate orderly approvals, including national security approval.

TRANSACTION DETAILS AND PLANNED USE OF PROCEEDS

After closing costs, MTS expects to realize net proceeds of approximately $425 million. The Company will evaluate a number of capital allocation options available to it, including the retirement of debt incurred to fund its pension funding prepayment made earlier this year and recent spectrum acquisitions. We will provide additional information on use of proceeds in the first quarter of 2016.

In addition, and as part of this transaction, MTS has agreed to retain the pension obligations, and related pension plan assets, in respect of retirees and other former employees of Allstream under Allstream’s current defined benefit pension plans. Allstream will retain the pension benefits in respect of current employees. MTS has also agreed to reimburse Allstream for certain solvency funding payments that may become payable in respect of employees of Allstream as they related to pre-closing benefits (i.e. as determined by the employee’s years of service and salary at the time of closing).

The completion of certain of these pension arrangements will be subject to the approval of the Office of the Superintendent of Financial Institutions (OSFI).

The transaction will not result in any changes to the pension plans for current MTS employees and retirees and they will continue to participate in their respective MTS pension plans, which will continue to be funded by the Company and are not impacted by this transaction.

By closing, the Company expects to record a non-cash, post-tax loss on the sale of approximately $75 million to $90 million based on current assumptions, a portion of which will be recognized in the Company’s fourth quarter results.

The Company expects to report its Allstream operations as discontinued operations beginning in the fourth quarter of 2015 until the transaction closes. This means that the revenue and expenses of Allstream will be presented separately from the continuing operations of MTS.

Further details will be provided in a material change report to be filed on SEDAR.

ZAYO

Zayo is listed on the New York Stock Exchange (symbol ZAYO). Zayo had revenues of $1.35 billion in its fiscal year ending June 30th, 2015 and has a market capitalization of $5.74 billion. Zayo provides communications infrastructure services, including fiber and bandwidth connectivity, colocation and cloud services to the world’s leading businesses. Customers include wireless and wireline carriers, media and content companies and finance, healthcare and other large enterprises. Zayo’s 87,000-mile network in the U.S. and Europe includes extensive metro connectivity to thousands of buildings and data centers. In addition to high-capacity dark fiber, wavelength, Ethernet and other connectivity solutions, Zayo offers colocation and cloud services in its carrier-neutral data centers. Zayo provides clients with flexible, customized solutions and self-service through Tranzact, an innovative online platform for managing and purchasing bandwidth and services. For more information, visit zayo.com.

ADVISORS AND LEGAL COUNSEL

The Company’s financial advisors, CIBC World Markets Inc. and TD Securities Inc., have each provided opinions in connection with the transaction to the Company’s Board of Directors that, as of November 20, 2015, and subject to the assumptions, qualifications and limitations provided therein, the consideration to be received by the Company is fair, from a financial point of view, to the Company. Stikeman Elliott acted as legal counsel to the Company. Drysdale Forstner Hamilton Public Affairs acted as public affairs and communications counsel to the Company.

About Manitoba Telecom Services Inc.

Manitoba Telecom Services Inc. (trading symbol: MBT) is one of Canada’s leading communications solutions companies. We are proud to be widely recognized for our leadership in corporate social responsibility and governance practices. For more information about the MTS Allstream group of companies, visit mtsallstream.com.

About MTS Inc.

MTS is Manitoba’s leading communications company, connecting people and places with wireless, high-speed Internet, TV, home phone and security services. MTS also offers a full suite of business solutions, including information technology, data storage and cloud computing through EPIC Information Solutions and MTS Data Centres. Founded more than a century ago and deeply rooted in the community, MTS provides grants, scholarships, sponsorships and volunteer support to youth-serving organizations across the province through MTS Future First. MTS is wholly owned by Manitoba Telecom Services Inc. (TSX: MBT). For more on MTS’s products and services, visit mts.ca.

About Allstream Inc.

Allstream is a Canadian leader in IP communications and the only national provider that works exclusively with business customers. Supported by its more than 30,000-kilometre nationwide high-performance fiber-optic network, Allstream’s communications technologies and services include a range of innovative, highly-scalable IP, Cloud and Security solutions that help organizations communicate more efficiently and profitably. Allstream is recognized for offering solutions that its competitors will not and for delivering the best customer experience among national providers. For more information on Allstream’s products and services, visit allstream.com.

About Zayo Group Holdings Inc.

Zayo Group Holdings Inc. (NYSE: ZAYO) provides communications infrastructure services, including fiber and bandwidth connectivity, colocation and cloud services to the world’s leading businesses. Customers include wireless and wireline carriers, media and content companies and finance, healthcare and other large enterprises. Zayo’s 87,000-mile network in the U.S. and Europe includes extensive metro connectivity to thousands of buildings and data centers. In addition to high-capacity dark fiber, wavelength, Ethernet and other connectivity solutions, Zayo offers colocation and cloud services in its carrier-neutral data centers. Zayo provides clients with flexible, customized solutions and self-service through Tranzact, an innovative online platform for managing and purchasing bandwidth and services. For more information, visit zayo.com.

Investment Community Conference Call and Webcast

MTS will hold a conference call with the investment community on Monday, November 23, at 8:30 a.m. (Eastern time). Participants include Jay Forbes, President and CEO, Paul Cadieux, Chief Financial Officer, Mike Strople, President Allstream, Marvin Boakye, Chief Human Resources Officer and Paul Beauregard, Chief Corporate and Strategy Officer & Corporate Secretary.
To participate, please dial toll-free 1-888-231-8191 or 647-427-7450. A replay will be available until December 3, 2015 by dialing 1-855-859-2056 and entering passcode 88286345.
Investors, media and the public are invited to participate on a listen-only basis by logging into the live audio webcast of the conference call on the Company’s website at mtsallstream.com/investors or by entering mtsallstream.com/investors/nov23newsrelease.

Additional information on the sale of Allstream including an investor relations presentation is available on our website at mtsallstream.com/investors/nov23irpresentation.

A replay of the conference call will be available on the Company’s website for one year.

Forward-looking Statements Disclaimer

This news release includes forward-looking statements and information (collectively, the “statements”) about the sale of Allstream, use of proceeds, satisfaction of closing conditions, including the national security review process, Competition Bureau approval and other customary closing conditions (including the operation and performance of the Allstream business until the time of closing and the requirement that Allstream’s business does not incur a material adverse effect), the compliance by both MTS and Allstream of various covenants prior to closing, the timing of closing, the actual realizable net cash proceeds from the transaction (including the quantum of actual transaction costs, net working capital, cash on hand and debt at Allstream as of the date of closing), the approval of OSFI of the underlying pension transfers, the expected future accounting treatment of Allstream, the competitive state of Canadian telecommunication markets and the Company’s future financial results and its ability to generate free cash flow in the future, all of which are subject to risks, uncertainties and assumptions. As a consequence, actual results in the future may differ materially from any expectation, conclusion, forecast or projection in such forward-looking statements. Therefore, forward-looking statements should be considered carefully and undue reliance should not be placed on them. Examples of statements that constitute forward-looking information may be identified by words such as “believe”, “expect”, “project”, “should”, “anticipate”, “could”, “target”, “forecast”, “intend”, “plan”, “outlook”, “see”, “set”, “pending”, and other similar terms.

Factors that could cause anticipated opportunities and actual results to differ materially include, but are not limited to, matters identified in the “Material assumptions” section and the “Risks and uncertainties” section of the Company’s 2014 Annual Management’s Discussion & Analysis which is available on SEDAR at sedar.com.

Please note that forward-looking statements reflect Management’s expectations as at the date hereof. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

For further information:

Manitoba Telecom Services Inc.

Media: Melanie McKague, Corporate Communications
204-958-3230
media.relations@mtsallstream.com

Investors: Brenda McInnes, Investor Relations
204-941-6205
investor.relations@mtsallstream.com

Zayo Group Holdings Inc.

Media: Shannon Paulk, PR and External Communications
303-577-5897
press@zayo.com

Investors: Brad Korch, Investor Relations
303-381-3284
IR@zayo.com

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