425 1 w55491ae425.txt 425 - D & E COMMUNICATIONS, INC. FILED BY: D&E COMMUNICATIONS, INC. PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933 SUBJECT COMPANY: CONESTOGA ENTERPRISES, INC. (COMMISSION FILE NO. 0-24064) Communication posted on December 4, 2001 on the web site of D&E Communications, Inc. [D&E COMMUNICATIONS LOGO] [CEI LOGO] D&E/CONESTOGA TRANSACTION PRESENTATION FORWARD-LOOKING STATEMENTS -------------------------------------------------------------------------------- D&E and Conestoga wish to caution readers that forward-looking statements made herein are based on a number of assumptions, estimates and projections. Such statements include, but are not limited to, statements concerning the proposed transaction, the combination's expected accretiveness to D&E's earnings, expected synergies, the transaction's impact on trading activity of D&E stock, D&E's strategy, maintenance of D&E's dividend policy and pro forma financial and other information. These statements are based upon the current beliefs and expectations of D&E's and Conestoga Enterprises' management, are not guarantees of future performance and involve risks and uncertainties, including those set forth in reports filed by D&E and Conestoga with the Securities and Exchange Commission as well as the following: the ability to obtain governmental approvals of the merger in a timely manner; the failure of D&E's and Conestoga Enterprises' stockholders to approve the merger; the risk that the businesses will not be integrated successfully; the risk that the synergies from the merger may not be fully realized or may take longer to realize than expected; and disruption from the merger making it more difficult to maintain relationships with customers, employees or suppliers. Any significant deviations from the assumptions, estimates and projections contained herein could cause actual results to differ materially from those in the forward-looking statements. Neither D&E nor Conestoga undertake any obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. [D&E COMMUNICATIONS LOGO] [CEI LOGO] 2 -------------------------------------------------------------------------------- INVESTORS AND SECURITY HOLDERS ARE URGED TO READ D&E's REGISTRATION STATEMENT ON FORM S-4 and the JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS relating to the merger transaction described herein, when they become available, BECAUSE THEY will CONTAIN IMPORTANT INFORMATION. When these and other documents relating to the transaction are filed with the United States Securities Exchange Commission ("Commission"), investors and security holders may obtain a free copy at the Commission's web site at www.sec.gov. The documents filed with the Commission by D&E and Conestoga may also be obtained for free from D&E by directing a request to D&E Communications Inc., 124 E. Main Street, Ephrata, PA 17522-0458, Attn: Investor Relations, telephone: (717) 738-8304. Certain of these documents may also be available on D&E's website at www.decommunications.com when they become available. READ THE DEFINITIVE REGISTRATION STATEMENT and JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION CONCERNING THE MERGER. [D&E COMMUNICATIONS LOGO] [CEI LOGO] 3 D&E'S STRATEGIC VISION G. WILLIAM RUHL - CEO OF D&E [D&E COMMUNICATIONS LOGO] [CEI LOGO] D&E IS A LEADING REGIONALLY FOCUSED ICP -------------------------------------------------------------------------------- - Long operating history, founded 1911 - Core Wireline Operations(1) - ILEC - 61,962 access lines - CLEC - 6,785 access lines - ISP - 10,000 subscribers - Equipment & Systems Integration - $28.5 million LTM revenue [PIE CHART] - Other Investments - PCS - Definitive Agreement to sell partnership interest to VoiceStream Wireless (1) As of September 30, 2001. [D&E COMMUNICATIONS LOGO] [CEI LOGO] 5 D&E SERVICE AREA -------------------------------------------------------------------------------- - Total service area includes 2.5 million people [GRAPHIC OF PENNSYLVANIA] [D&E LOGO] 6 [CEI LOGO] RECENT MILESTONES -------------------------------------------------------------------------------- D&E has a long history of excellence in operations and customer service [1911-2001 FLOW CHART GRAPHIC] 2001 ANNOUNCE AGREEMENT TO ACQUIRE CONESTOGA ENTER AGREEMENT TO SELL PCS ONE 2000 Sell Hungarian company Launch Jazzd Internet service Acquire 2 systems integration businesses 1999 Begin CLEC edge-out strategy 1997 Launch GSM wireless service (d.b.a) PCS ONE Begin providing telephone service in Poland 1996 Acquire systems integration business 1994 Launch telephone service in Hungary 1984 Digital/fiber optic technology introduced 1911 Company founded
[D&E LOGO] 7 [CEI LOGO] STRATEGIC VISION -------------------------------------------------------------------------------- Create a leading regional integrated communications provider leveraging incumbent assets to capture economies of scale, enter contiguous markets and offer a complete product portfolio - CREATE CRITICAL MASS - FULL PRODUCT PORTFOLIO > ENHANCE SHAREHOLDER VALUE - SERVICE EXCELLENCE - LEVERAGE NETWORK ASSETS
[D&E LOGO] 8 [CEI LOGO] EXPERIENCED MANAGEMENT TEAM -------------------------------------------------------------------------------- 6 senior managers with an average of over 35 years of telecom experience ANNE B. SWEIGART - Has held the positions of President and Chairman of the Board of D&E Chairman and President since 1985. CEO from 1985 to October 2001 - 65 years at D&E ROBERT M. LAUMAN - Joined D&E in 1983 as EVP and COO Vice Chairman, Senior Vice President - 37 years at Bell of Pennsylvania G. WILLIAM RUHL - CEO of D&E; joined D&E in 1991 Chief Executive Officer - 30 years at Bell of Pennsylvania THOMAS E. MORELL - CFO of D&E since 1995 Chief Financial Officer - Joined D&E in 1984; previously with Coopers & Lybrand, LLP ALBERT H. KRAMER - Joined Conestoga in 1995, President since 1998 President, Conestoga Enterprises, Inc. - 11 years at D&E prior to joining Conestoga W. GARTH SPRECHER - VP and Secretary of D&E since 1996 Vice President and Secretary - 17 years at D&E
[D&E LOGO] 9 [CEI LOGO] FINANCIAL PERFORMANCE -------------------------------------------------------------------------------- D&E's significant investment in technology and personnel should position the Company for successful growth Revenue ------- ($ in millions) [BAR CHART]
1998 1999 2000 YTD Annualized D&E 53.3 63.5 74.0 87.0
EBITDA ------ ($ in millions) [BAR CHART]
1998 1999 2000 YTD Annualized D&E 17.3 18.9 17.9 14.2
* YTD September 30, 2001 annualized. [D&E COMMUNICATIONS LOGO] 10 [CEI LOGO] INVESTMENT HIGHLIGHTS -------------------------------------------------------------------------------- - Leading regional integrated communications provider -- Strong brand name recognition and customer relationships -- Established ILEC provides stable revenues and cash flow - Limited competition - Experienced management team - Dividends provide current income to shareholders - Conestoga merger enhances position as a growing rural communications provider [D&E COMMUNICATIONS LOGO] 11 [CEI LOGO] CONESTOGA COMPANY OVERVIEW ALBERT H. KRAMER - PRESIDENT OF CONESTOGA [D&E COMMUNICATIONS LOGO] [CEI LOGO] CONESTOGA IS A LEADING REGIONALLY FOCUSED ICP -------------------------------------------------------------------------------- - Long operating history, founded 1902 - Core Wireline Operations(1) -- ILEC - 84,509 access lines -- CLEC - 16,635 access lines -- DSL - 1,214 subscribers -- Equipment & Systems Integration - $9.4 million LTM revenue [PIE CHART] - Other Operations(1) -- PCS - 18,976 subscribers (GSM technology; expected to be divested) -- 5,475 paging subscribers (1) As of September 30, 2001. [D&E COMMUNICATIONS LOGO] 13 [CEI LOGO] CONESTOGA SERVICE AREA -------------------------------------------------------------------------------- [GRAPHIC OF PENNSYLVANIA] [D&E COMMUNICATIONS LOGO] 14 [CEI LOGO] FINANCIAL PERFORMANCE -------------------------------------------------------------------------------- Conestoga has exhibited a consistently strong financial performance while investing in growth initiatives Revenue ------- ($ in millions) [BAR CHART]
1998 1999 2000 YTD Annualized Conestoga 77.3 87.1 87.6 92.7
EBITDA ------ ($ in millions) [BAR CHART]
1998 1999 2000 YTD Annualized Conestoga 25.0 25.7 25.8 28.5
* YTD September 30, 2001 annualized. [D&E COMMUNICATIONS LOGO] 15 [CEI LOGO] CONESTOGA TRANSACTION OVERVIEW THOMAS E. MORELL - CFO OF D&E [D&E COMMUNICATIONS LOGO] [CEI LOGO] CONESTOGA TRANSACTION SUMMARY -------------------------------------------------------------------------------- - Purchase price and consideration - $33 per Conestoga share (if market price of D&E's stock is between $13 and $23 per share) - $273 million plus assumption of $73 million of debt - $150 million in cash and D&E common stock with an approximate value of $123 million - Cash consideration funded with $100 million add-on senior secured credit facility from CoBank and cash equivalents - Guarantee to shareholders a minimum of 55% in cash, if elected - D&E plans to maintain its current dividend policy - Accounting/ tax treatment - Purchase accounting - Tax-free reorganization with an automatic conversion to taxable structure if the transaction no longer qualified for tax deferral - Closing targeted in the second quarter of 2002 - No significant regulatory or shareholder related obstacles anticipated - Voting agreements executed by officers, directors and the D&E Voting Trust [D&E COMMUNICATIONS LOGO] 17 [CEI LOGO] PURCHASE PRICE MECHANISM --------------------------------------------------------------------------------
NUMBER OF DECC DECC PROPOSED PROPOSED PER SHARE CONSIDERATION (IN $) SHARE CONVERSION SHARES CENI DECC ------------------------------ PRICE RATIO ISSUED OWNERSHIP OWNERSHIP STOCK CASH TOTAL ----- ---------- --------- --------- --------- ----- ----- ------ $8.00 (2) 2.5385 9,467,068 56.3% 43.7% 9.14 18.15 $27.29 $9.00 2.5385 9,467,068 56.3% 43.7% 10.28 18.15 $28.43 $10.00 2.5385 9,467,068 56.3% 43.7% 11.42 18.15 $29.57 $10.60 (3) 2.5385 9,467,068 56.3% 43.7% 12.11 18.15 $30.26 $11.00 2.5385 9,467,068 56.3% 43.7% 12.57 18.15 $30.72 $12.00 2.5385 9,467,068 56.3% 43.7% 13.71 18.15 $31.86 ------------------------------------------------------------------------------------------------------- $13.00 2.5385 9,467,068 56.3% 43.7% 14.85 18.15 $33.00 ------------------------------------------------------------------------------------------------------- $14.00 2.3571 8,790,849 54.5% 45.5% 14.85 18.15 $33.00 $15.00 2.2000 8,204,792 52.7% 47.3% 14.85 18.15 $33.00 $16.00 2.0625 7,691,993 51.1% 48.9% 14.85 18.15 $33.00 $17.00 1.9412 7,239,523 49.6% 50.4% 14.85 18.15 $33.00 $17.55 (4) 1.8803 7,012,643 48.8% 51.2% 14.85 18.15 $33.00 $18.00 1.8333 6,837,327 48.2% 51.8% 14.85 18.15 $33.00 $19.00 1.7368 6,477,468 46.8% 53.2% 14.85 18.15 $33.00 $20.00 1.6500 6,153,594 45.6% 54.4% 14.85 18.15 $33.00 $21.00 1.5714 5,860,566 44.4% 55.6% 14.85 18.15 $33.00 $22.00 1.5000 5,594,177 43.2% 56.8% 14.85 18.15 $33.00 ------------------------------------------------------------------------------------------------------- $23.00 1.4348 5,350,952 42.1% 57.9% 14.85 18.15 $33.00 -------------------------------------------------------------------------------------------------------
(1) Assumes 55% cash / 45% stock shareholder election. (2) Conestoga has the right to terminate the agreement under certain circumstances if the D&E share price declines below $8.00. (3) Transaction will not be accorded tax-free reorganization treatment if the D&E share price declines below $10.60. (4) Represents D&E's closing share price on December 3, 2001 - $17.55. ----- Represents the upper and lower bounds of the purchase price mechanism ----- which ranges from $13.00 to $23.00. [D&E COMMUNICATIONS LOGO] 18 [CEI LOGO] TRANSACTION ECONOMICS SUMMARY -------------------------------------------------------------------------------- ($ in Millions, except per share values and access line multiples) - D&E expects to divest D&E expects to divest the wireless operations of Conestoga, which will reduce the implied multiples paid for core wireline operations PURCHASE PRICE ANALYSIS Offer Price Per Share $ 33.00 --------- Equity Value 273.3 Assumed Net Debt (9/30/01) 67.0 Break Up Fee 10.0 --------- Total Enterprise Value $ 350.3 TEV / 2001 Annualized EBITDA 12.3x Multiple of Access Lines (9/30/01) $ 3,463.6
* YTD September 30, 2001 annualized. [D&E COMMUNICATIONS LOGO] 19 [CEI LOGO] SIGNIFICANT MERGER BENEFITS -------------------------------------------------------------------------------- Highly complementary business plans, identifiable benefits to accrue from Conestoga acquisition - Adjacent geographic markets - Focused on wireline services with the divestiture of wireless operations - Enhanced scale and depth to accelerate business plan - Enhanced growth and profitability prospects - Potential revenue and cost synergies - Garner analyst coverage and begin developing an institutional following - Increased liquidity through greater trading volume - Increased float via merger structure - Provides expanded management depth and skill sets required to operate larger operation [D&E COMMUNICATIONS LOGO] 20 [CEI LOGO] CREATING A LEADING RURAL WIRELINE CARRIER -------------------------------------------------------------------------------- Highly complementary footprints [PRO FORMA D&E MAP] [D&E COMMUNICATIONS LOGO] 21 [CEI LOGO] CREATING A LEADING RURAL WIRELINE CARRIER -------------------------------------------------------------------------------- Complementary business plans yield enhanced growth and profitability
D&E CONESTOGA PRO FORMA COMBINED ------------------------------------------------------------------------------------------------ ILEC - 61,962 access lines - 84,509 access lines - 146,471 ACCESS LINES - 100,000 POPs - 160,650 POPs - 260,650 POPS ------------------------------------------------------------------------------------------------ CLEC - 6,785 access lines - 16,635 access lines - 23,420 ACCESS LINES ------------------------------------------------------------------------------------------------ WIRELESS - 2.0 million POPs - 1.0 million POPs - WIRELESS ASSETS -- TO BE DIVESTED - 100,000 subscribers - 18,976 subscribers - GSM technology - GSM technology ------------------------------------------------------------------------------------------------ DATA - Equipment & Systems - Equipment & Systems - EQUIPMENT & INTEGRATION Integration Integration - INTERNET - Internet - Internet ------------------------------------------------------------------------------------------------
[D&E COMMUNICATIONS LOGO] 22 [CEI LOGO] D&E - Conestoga Pro Forma Financial Summary -------------------------------------------------------------------------------- Strengthened financial positioning should position the Company for successful growth Pro Forma Revenue ----------------- ($ in millions) [BAR CHART]
1998 1999 2000 YTD Annualized D&E 53.3 63.5 74.0 87.0 Conestoga 77.3 87.1 87.6 92.7
Pro Forma EBITDA ---------------- ($ in millions) [BAR CHART]
1998 1999 2000 YTD Annualized D&E 17.3 18.9 17.9 14.2 Conestoga 27.8 26.5 25.8 28.5
* YTD September 30, 2001 annualized. [D&E COMMUNICATIONS LOGO] 23 [CEI LOGO] D&E - Conestoga Pro Forma Comparison -------------------------------------------------------------------------------- Increasing scale to achieve critical mass LTM(1) Revenue -------------- ($ in millions) [BAR CHART]
ALSK CTCO Pro Forma SURW CTCI HTCO NPSI D&E 325 306 179 152 129 108 85
LTM (1) EBITDA -------------- ($ in millions) [BAR CHART]
ALSK CTCO Pro Forma SURW HTCO NPSI CTCI D&E 127 121 44 41 40 34 32
ILEC & CLEC Access Lines(2) --------------------------- (000's) [BAR CHART]
CTCO ALSK Pro Forma CTCI SURW NPSI HTCO D&E 442 333 170 141 133 114 77
(1) LTM as of September 30, 2001 and adjusted for non recurring items. (2) As of September 30, 2001. [D&E COMMUNICATIONS LOGO] 24 [CEI LOGO]