International Fibercom Inc. Agrees to Purchase All Star Telecom Inc
PHOENIX--(BUSINESS WIRE)--April 6, 1999--
-Earn-Out Based Transaction Gives IFC Major Western US Presence; Expected to be Immediately Accretive-
International Fibercom Inc. (NASDAQ:IFCI) and its Chairman and Chief Executive Officer Joseph P. Kealy Tuesday announced that the company has entered into a definitive agreement to purchase privately owned All Star Telecom Inc., for up to $21.5 million in cash and common stock.
The closing of the transaction is subject to satisfaction of certain conditions, including completion of final due diligence. On a preliminary unaudited basis, All Star, a June 30 fiscal reporting company, reported sales of $15.6 million for the six months ended Dec. 31, 1998, and net income for that period of $500,000. Upon completion of this acquisition, to be accounted for as a purchase, All Star will operate as a wholly owned subsidiary of IFC.
Joseph P. Kealy, IFC chairman, noted that this acquisition is expected to be immediately accretive to the earnings of IFC. IFC's acquisition strategy requires that acquisitions be immediately accretive. IFC reported record revenue, profit and per share profit for 1998, with sales up 83% to $105 million, earnings up 83% to $11.4 million, and earnings per diluted share up 23% to $0.43 per share. Gross profit margins increased to 33% from 27% reported in 1997.
All Star, based in Sacramento, Calif., is one of only a handful of companies in the nation in the business of building the internet's fiber backbone, with single source, turnkey capabilities.
All Star specializes in the engineering, development and maintenance of telecommunications infrastructure systems, including cellular, for the CATV, LEC and CLEC industries. All Star's vertical engineering and development capability affords it the ability to respond to the needs of other major customers requiring fully integrated services.
These entities include governmental agencies, the education establishment and Fortune 500 companies. All Star operates throughout the western United States and its major customers include Boeing, Comcast, GTE, IXC Communications, MCI-WorldCom, Pacific Bell and Williams Communications.
The purchase agreement calls for a total purchase price of up to $21.5 million, with $8 million payable at closing and the remainder subject to an earn-out based on All Star's achievement of certain pretax earnings targets over the next three years, which cumulatively total $21.5 million.
Payments may be in cash or in stock at the company's discretion, with at least 40% of the total proceeds to be paid in stock. IFCI shares issued in 1999 have registration rights.
Joseph P. Kealy, CEO and chairman stated, "All Star is a company in the business of engineering and building fiber backbone, the future of telecommunications. All Star is a perfect fit for IFC. We believe that it is poised for significant growth in the vibrant marketplaces in the western region of the United States.
"All Star is already a notable competitor in these marketplaces. All Star is a young, aggressive, well run, and growing company. It operates in areas where IFC is being asked to take on contracts.
"Teamed with its sister companies, Compass Communications, Kleven Communications and Riley Communications, this acquisition gives IFC a presence as a major engineering and infrastructure development force in the western United States. With All Star, IFC will be in a position to establish exclusive service relationships and accept larger contracts.
"I believe that our alliance with All Star will be viewed favorably by our customers. With All Star's resources, including nearly 400 employees, IFC can now dedicate significantly more resources to customer projects, or take on these projects in their entirety."
Note to Editors: This press release contains certain forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements, by their very nature, include risks and uncertainties.
Accordingly, the company's actual results could differ materially from those discussed in this release. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs.
Such factors, many of which are beyond the control of the company, include the following: the company's success in obtaining new contracts; the volume and type of work orders that are received under such contracts; the accuracy of the cost estimates for projects; the company's ability to complete its projects on time and within budget; levels of, and ability to collect accounts receivable; availability of trained personnel and utilization of the company's capacity to complete work; the company's ability to complete proposed acquisitions and, upon their completion, to integrate the acquisitions into its organization and manage its growth; competition and competitive pressures on pricing; and economic conditions in the United States and in the regions served by the company.
A more complete listing of cautionary statements and risk factors is contained in the company's report on Form 10-KSB for the year ended Dec. 31, 1998 filed with the Securities and Exchange Commission.
CONTACT:
International FiberCom Inc., Phoenix
Joseph P. Kealy or Douglas N. Kimball, 602/941-1900 |
