One of Consolidated Communications’ institutional investors is encouraging other shareholders not to vote in favor of the proposed Consolidated sale to Searchlight Capital Partners LP and British Columbia Investment Management Corporation.

The investor, Wildcat Capital Management, owns about 3 million shares of Consolidated stock, or between 2% and 3% of the company. That makes Wildcat the fifth largest independent stockholder, according to a Wildcat press release. In an open letter to the Consolidated board of directors, Wildcat argues that Consolidated is worth substantially more than the $3.1 billion that the potential acquirers have offered to pay. According to Wildcat, Consolidated is worth more like $4 billion.

Key points that Wildcat makes in its letter opposing the Consolidated sale:

  • Consolidated’s current EBITDA generation doesn’t reflect the estimated $733 million that the company invested in fiber upgrades since 2021, and those upgrades have not had full impact yet. The would-be acquirers’ EBITDA estimate also doesn’t reflect actions that Consolidated took in July to generate $30 million in annualized cost savings. Accordingly, Wildcat believes Consolidated’s EBITDA should be approximately $520 million, which is about 70% higher than the provider’s run rate in the second quarter of 2023.
  • The would-be purchasers’ valuation doesn’t take into account at least $230 million of construction work in progress. Additionally, Consolidated management said the company will receive $73 million gross cash proceeds from the divestiture of its Washington state assets. Wildcat also believes Consolidated may be eligible to receive between $200 and $450 million in BEAD funding. When all this is factored in, Wildcat believes Consolidated would have additional liquidity for additional fiber deployments.

Wildcat makes a point of saying that it is not an activist investor. Instead, the firm said, “we are fiduciaries on behalf of our investors and when the take-private transaction of a public company we have been invested in for more than two years was announced at a price that we do not feel represents its fair value, we reluctantly felt compelled to issue a public statement.”

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