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Cincinnati Bell Agrees to $2.6B Acquisition, Shares Rally

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Cincinnati Bell Inc. CBB recently announced that it has inked an agreement to be acquired by Brookfield Infrastructure Partners L.P. BIP, at a whopping valuation of $2.6 billion. Post the news of its acquisition, the shares of this local technology provider skyrocketed 35.36% to $10.45, on Dec 23. Reportedly, the surge in shares is the largest single-day jump this year.

Brookfield Infrastructure Partners is a publicly-traded limited partnership involved in the acquisition and management of infrastructure assets globally. Backed by healthy business dynamics, the Toronto-based conglomerate has a diversified portfolio of assets in the transport, utilities and data infrastructure sectors across North and South America, Europe and Asia Pacific.

Per the deal, the company’s shareholders will be entitled to receive $10.50 in cash for each outstanding share or 36% above its $7.72 closing price on Dec 20. This, in turn, translates to an acquisition price of above $529 million, which along with the $2 billion in debt, brings the total value of the deal to nearly $2.6 billion. The total workforce, which comprises nearly 4,300 employees, has already approved the deal. Subject to certain regulatory and shareholder approvals, the much-awaited transaction is expected to close by the end of 2020.

Post its closure, the transaction is anticipated to enhance the overall financial health of this data and voice communications services provider, by delivering state-of-the-art integrated communications infrastructure to nearly 1.3 million customers through its upgraded fiber network. This will further help the company deliver flexible data, video, voice and IP solutions with enhanced network coverage and broadband speed to customers primarily based in Ohio, Indiana, Kentucky and Hawaii. The transaction is likely to fuel Cincinnati Bell’s growth with a positive cash flow, reflecting brighter prospects for the company.

Cincinnati Bell’s efforts to evolve from a legacy copper-based telecommunications company to an IT company with contemporary fiber assets, offering seamless network solutions to both consumer and business customers, are remarkable. Its strategic move to prioritize customer satisfaction, followed by the creation of job opportunities, augurs well for the region’s economic development.

Notably, the company’s investment in fiber supports the growing IoT trend, which proliferates the usage of broadband connections, along with smart-home devices. Reinforced with the claim of future-proofing 50% of its network services, Cincinnati Bell is undergoing a drastic transformation to upgrade its network infrastructure to the next-gen fiber. This will support the burgeoning demand for data and accelerate 5G mobile-technology growth.

Cincinnati Bell has a long-term earnings growth expectation of 2%. Driven by diligent execution of its operations, the stock has rallied 34.3%, as against the industry’s decline of 26.1% in the year-to-date period.

Zacks Rank & Stocks to Consider

Cincinnati Bell currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader industry are The AES Corporation AES and Alliant Energy Corporation (LNT - Free Report) . While AES sports a Zacks Rank #1 (Strong Buy), Alliant Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AES has a long-term earnings expectation of 9.1%.

Alliant Energy has a long-term earnings expectation of 5.5%.

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