Davel Communications, Inc. and PhoneTel Technologies, Inc. Sign Letter of Intent to Merge Operations-- Agreement Calls for the Financial Restructuring of Both Companies -- Servicing Agreement to Accelerate Synergies and Cost Savings
PR NEWSWIRE - June 13, 2001 07:30
TAMPA, Fla. and CLEVELAND, Jun 13, 2001 /PRNewswire via COMTEX/ -- Davel Communications, Inc. (OTC Bulletin Board: DAVL), and PhoneTel Technologies, Inc. (OTC Bulletin Board: PHTE), the nation's two leading publicly traded independent pay telephone service providers, today announced that they have signed a letter of intent to merge. The letter of intent calls for the execution of a definitive merger agreement by July 31, 2001 and a substantial debt restructuring for each company. In connection with the expected merger, PhoneTel will become a wholly owned subsidiary of Davel. In addition, the two companies have entered into a servicing agreement designed to commence cost savings initiatives in advance of the closing of the merger.
As part of the completion of the merger of the two companies, the senior secured creditors of both Davel and PhoneTel will exchange a substantial amount of the combined debt for equity securities of the respective companies and will restructure the remaining debt. In connection with PhoneTel's debt exchange, its senior secured lenders will own 87% of PhoneTel's outstanding common stock immediately prior to the merger with the remaining senior secured debt not to exceed $36.5 million (as compared to approximately $55 million currently outstanding). Existing holders of PhoneTel common stock will own 9% of PhoneTel's outstanding shares, and 4% will be reserved for PhoneTel employee stock options. In connection with Davel's debt exchange, its senior secured lenders will own 93% of Davel's outstanding common stock immediately prior to the merger, with the remaining senior secured debt not to exceed $63.5 million (as compared to approximately $261 million currently outstanding). Existing shareholders of Davel common stock will own 3% of Davel's outstanding shares and 4% of the common stock will be reserved for the issuance of stock options to Davel employees.
Immediately following the merger, current PhoneTel shareholders will own approximately 3.28% of the shares of Davel common stock and current Davel shareholders will own approximately 1.91%. Of the remaining shares, 4.00% are intended to be reserved for issuance of employee stock options and the companies' current lenders will own approximately 90.81%.
Effective with the merger, the then outstanding debt of both entities, currently in the approximate amount of $316 million, will be reduced to $100 million in debt of the merged entity through the debt and equity restructuring outlined above. Of this $100 million of restructured debt, $50 million will be amortizing term debt with interest and principal payable from operating cash flows. Payment of the interest and principal on the remaining $50 million of debt will be deferred under terms to be negotiated in connection with the definitive merger agreement.
The merger will bring together the two largest independent payphone providers in the country, with a combined installed base of approximately 100,000 payphones. The combined company is expected to realize significant cost savings through more efficient concentration of payphone routes, lower field operating costs and the elimination of redundant general and administrative expenses. Pending the merger, the administrative offices of PhoneTel and Davel will remain in Cleveland, Ohio and Tampa, Florida, respectively.
To accelerate these anticipated cost savings prior to the merger becoming effective, the two companies have entered into a servicing agreement. Under this agreement, the two companies will immediately focus on gaining operating efficiencies via mutual servicing arrangements between their respective field office networks on a geographic basis.
The transaction is subject to the execution of a definitive merger agreement, approval by the boards of directors of PhoneTel and Davel, approval by the shareholders and existing senior secured lenders of both companies, and the receipt of material third party and governmental approvals and consents.
After completion of the merger, John D. Chichester, President and Chief Executive Officer of PhoneTel, will serve as the Chief Executive Officer of the merged company and Bruce W. Renard, Davel's Senior Vice President of Regulatory/External Affairs/Human Resources, General Counsel and Corporate Secretary, will serve as President.
Ray Gross, Chairman and Chief Executive Officer of Davel commented, "The combination of our operations with PhoneTel offers an excellent geographic fit, creating significant synergies and expected cost savings as well as anticipated enhancements to service quality. With the cooperation of Davel's senior lenders, this transaction allows us to appropriately restructure Davel to become part of a more robust entity with a much stronger footing in today's extremely challenging industry environment."
Commenting on the merger, John D. Chichester, President and CEO of PhoneTel added, "This transaction represents an exciting and highly beneficial opportunity for both companies. Together, PhoneTel and Davel will be able to achieve better route density, and improved operating cost and service efficiencies -- making this a desirable transaction for both our customers and stakeholders."
Mr. Chichester concluded, "The merger is the result of a cooperative spirit on the part of both companies and their lender groups. We believe the new entity created through this transaction will be well positioned both to meet future challenges and to take full advantage of new opportunities as they arise in the payphone industry." |
