XO Becomes Private Company

By Josh Long

XO Holdings, the telecommunications provider backed by billionaire Carl Icahn, has become a private company.

That means the companys common stock is no longer listed on the OTC Bulletin Board or Pink Sheets, and XO will cease reporting its financials with the Securities and Exchange Commission.

On Aug. 18, the Herndon, Va.-based CLEC (competitive local exchange carrier) completed a merger agreement to sell itself to affiliates of Icahn, who already owned nearly 92 percent of the combined voting power of the companys outstanding shares of capital stock.

The agreement called for XOs common shareholders to receive $1.40 in cash without interest. They also acquired a non-transferrable, uncertificated contract right to receive a pro rata share of certain proceeds” that XOs Parent Group” which is comprised of Icahn affiliates receives if it enters into an agreement to sell the company or its assets within one year of the execution date of the merger agreement and a sale is actually consummated, according to XOs second-quarter earnings announcement.

XO noted shareholders were receiving a cash value that represents a 109 percent premium over the last full trading day prior to execution of the merger agreement. Shares of XO (XOHO) previously traded over the counter and were listed at $1.38 as of Aug. 18, according to the OTC Bulletin Board.

Early this year, XO announced forming a special committee of its board of directors to evaluate a proposal by an Icahn affiliate to acquire the company for 70 cents per share in cash. Following its review, the special committee unanimously recommended entering into a merger agreement, and the board of directors also found that an agreement was in the best interest of the company and its common stockholders.

Founded 15 years ago, XO is a part of a group of telephone and Internet companies that emerged thanks to the Telecommunications Act of 1996. Many CLECs that invested billions of dollars went belly up before they could start earning a profit, and most of the survivors have consolidated in order to more effectively compete with larger players like AT&T and Verizon Communications.

A future merger between XO and another large CLEC wouldnt be much of a surprise.

In the second quarter, XO reported a net loss of $10.1 million on revenues of $381.7 million. The company sells telecommunications solutions to business customers, government agencies, other telecommunications providers and Internet content providers.