PAETEC Hits $2B Annual Revenue Mark With Finalized Cavalier Buy

PAETEC this week finalized the $460 million purchase of privately held Cavalier Telephone Corp.

The merger was announced on Sept. 13.

"We are very pleased to close this acquisition of Cavalier Telephone in less than three months from signing the definitive agreement," Arunas Chesonis, PAETEC chairman and CEO, said in a prepared statement. "Over the summer, we developed a dedicated cross-functional M&A team to facilitate the complex merger issues. That team, along with the diligent efforts of our regulatory, legal and financial staff, made this a dramatically quicker process."

The key reason PAETEC bought Cavalier was for Cavaliers Intellifiber Networks Inc. holdings. At first, PAETEC considered buying just Intelliber, Chesonis said in September, but then realized it would be more advantageous to buy all of Cavaliers operations enterprise, fiber and even residential. Cavalier had paid for top-dollar fiber assets at pennies-on-the-dollar prices and PAETEC would only benefit from that, Chesonis said.

PAETEC now owns more than 10,600 metro fiber-route miles, more than 36,700 fiber-route miles and 1,178 colocations. Plus, Cavaliers networks complement PAETECs existing routes and expand some. That will translate into less reliance on Bell networks, Chesonis said when the deal was announced, and give PAETEC negotiating leverage for better special access rates from Verizon Communications Inc. PAETEC could move a lot" of metro and long-haul business from Verizon to the likes of Global Crossing and Sprint Nextel Corp. if Big Red wont cut a deal, Chesonis said.

The majority of stuff we can give them, we dont have to give them," if Verizon doesnt agree to more favorable pricing, Chesonis said.

Buying Cavalier also means PAETEC has become a $2 billion CLEC itll go from earning about $1.58 billion in annual revenue to $1.95 billion.