Mergers and Acquisitions

Acquisition of Hawaiian Telcom Holdco, Inc.

On July 2, 2018, the Company acquired Hawaiian Telcom Holdco, Inc. for cash consideration of $218.3 million, stock consideration of $121.2 million and debt repayments, including accrued interest, of $318.2 million. Hawaiian Telcom is the ILEC for the State of Hawaii and the largest full service provider of communication services and products in the state. With the acquisition, the Company gains access to both Honolulu, a well-developed, fiber-rich city, as well as the growing neighbor islands. The companies' combined fiber networks are approximately 16,700 fiber route miles.

The purchase price for Hawaiian Telcom consisted of the following:



(dollars in millions)
Cash consideration plus debt assumed	$	536.5
Cincinnati Bell Inc. stock issued	121.2
Debt repayment	(318.2		)
Total purchase price	$	339.5

In order to fund the acquisition, the Company utilized proceeds of $350.0 million from the 8% Senior Notes due 2025 ("8% Notes"), $16.5 million of the cash that was previously restricted to fund interest payments on the 8% Notes, drew $35.0 million on the revolving credit facility and $154.0 million on the accounts receivable securitization facility (see Note 6). In conjunction with the acquisition, the Company issued 7.7 million Common Shares at a price of $15.70 per share as stock consideration. The Company recorded a total of $27.7 million in acquisition expenses related to the acquisition of Hawaiian Telcom, of which $0.5 million and $1.6 million were recorded in the three months ended March 31, 2019 and 2018, respectively. These expenses are recorded in "Transaction and integration costs" on the Condensed Consolidated Statements of Operations.

Purchase Price Allocation and Other Items

The determination of the final purchase price allocation to specific assets acquired and liabilities assumed is incomplete for the Hawaiian Telcom transaction. The purchase price allocations, based on fair value estimates, may change in future periods as customary post-closing reviews are concluded during the measurement period, and the fair value estimates of assets and liabilities and certain tax aspects of the transaction are finalized.

The purchase price for Hawaiian Telcom has been currently allocated to individual assets acquired and liabilities assumed as follows:



(dollars in millions)	Hawaiian Telcom
Assets acquired
Cash	$	4.3
Receivables	25.5
Inventory, materials and supplies	6.9
Prepaid expenses and other current assets	5.9
Property, plant and equipment	701.5
Goodwill	9.6
Intangible assets	52.0
Deferred income tax asset	43.8
Other noncurrent assets	2.1
Total assets acquired	851.6
Liabilities assumed
Accounts payable	59.2
Current portion of long-term debt	10.2
Unearned revenue and customer deposits	13.5
Accrued expenses and other current liabilities	21.8
Long-term debt, less current portion	304.5
Pension and postretirement benefit obligations	68.9
Other noncurrent liabilities	34.0
Total liabilities assumed	512.1
Net assets acquired	$	339.5

During the first quarter of 2019, the Company recorded immaterial measurement period adjustments for Hawaiian Telcom. The offset of these adjustments were recorded as an increases to "Goodwill."

The estimated fair value of identifiable intangible assets and their estimated useful lives are as follows:



	Hawaiian Telcom
(dollars in millions)	Fair Value		Useful Lives
Customer relationships	$	26.0	15 years
Trade name	26.0		15 years
Total identifiable intangible assets	$	52.0

Identifiable intangible assets are amortized over their useful lives based on a number of assumptions including the estimated period of economic benefit and utilization.

Pro Forma Information (Unaudited)

The following table provides the unaudited pro forma results of operations for the three months ended March 31, 2018 as if the acquisition of Hawaiian Telcom had taken place as of the beginning of fiscal year 2017. These proforma results include adjustments related to the financing of the acquisition, an increase to depreciation and amortization associated with the higher values of property, plant and equipment and intangible assets, an increase to interest expense for the additional debt incurred to complete the acquisition, and other various related income tax effects.

The pro forma information does not necessarily reflect the actual results of operations had the acquisition been consummated at the beginning of the annual reporting period indicated, nor is it necessarily indicative of future operating results. The pro forma information does not include any (i) potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition or (ii) transaction or integration costs relating to the acquisition.



	Three Months Ended
	March 31,
(dollars in millions, except per share amounts)	2018
Revenue	$	384.9
Net loss applicable to common shareholders	(14.3		)
Earnings per share:
Basic and diluted loss per common share	$	(0.29	)