Integra Snaps Up Rival Eschelon

CLEC merger fever on the East Coast is spreading to the West Coast.

Integra Telecom Inc. announced on Tuesday it is buying rival CLEC Eschelon Telecom Inc. for $30 per share, or approximately $566 million.

The deal is expected to close in the third quarter.

Integra is based in Portland, Ore., and serves business throughout the Pacific Northwest and Intermountain West. Eschelon is headquartered in Minneapolis, but, through a series of acquisitions, also covers a number of Western territories. Both carriers are formidable competitors to Qwest Communications International Inc.

Integra is privately held so, as a result, Eschelon will stop trading on the Nasdaq once the transaction is completed.

Eschelon has bought five companies since 2005 and, in a conference call Tuesday with managers, addressed why Eschelon didnt buy Integra.

We attempted to do that over the last several years, but our pricing fell short of what their investors would accept and they stepped up to provide Eschelon with a good price that was acceptable to management and our board, said Rick Smith, president and CEO of Eschelon.

He emphasized that Eschelon was not for sale, nor was it actively seeking buyers. But, he added, Integra presented a compelling price that after much analysis and debate, was deemed to be acceptable to our board.

Integra CEO Dudley Slater has said the consolidated headquarters will be in Portland, although a regional center will stay in Minneapolis.

Dont assume all functions will be moved to Portland, because they will not be, Smith told employees on Tuesday. [T]hey will generally exist where the best processes and people exist.

Smith instructed Eschelons managers to keep selling the companys services, even to Integras customers, and to try to keep clients from moving to Integra.

Eschelon still will close its UNICOM acquisition in May and continue integrating operations from its previous acquisitions.

The deal will be financed through a senior credit facility arranged by Deutsche Bank Securities. The deal needs approval from Eschelons shareholders, as well as the typical conditions and regulatory approvals.

Eschelon Telecom Inc. www.eschelon.com  

Integra Telecom Inc. www.integratelecom.com