In what executives described as a merger of twin firms, Cincinnati Bell has proposed to buy Hawaiian Telcom, the 134-year-old telecommunications company that is one of the state’s oldest companies, for $650 million, according to the terms of a deal announced Monday.

The acquisition, which requires approval by regulators and shareholders, will not affect Hawaiian Telcom’s 1,300 Hawaii employees, the company said in a statement.

“They’re not doing this to take a bunch of jobs out of Hawaii,” Scott Barber, Hawaiian Telcom’s president and chief executive, said in an interview.

Hawaii Telcom Pay phones Manoa. 9 sept 2016 JOHN HILL STORY.

Under a merger with Cincinnati Bell, Hawaiian Telcom stockholders will have the option to elect either  cash, shares of Cincinnati Bell common stock, or a mix of cash and stock.

Cory Lum/Civil Beat

For Hawaiian Telcom’s customers, the deal likely means more of what they have seen from the company – increased investment in a robust fiber optic network and diversified services – but potentially rolled out at a faster rate, Barber said.

As demand fades for the wireline telephone services that were once the financial backbone for regulated telephone monopolies, the companies have expanded into other services. In that regard, Hawaiian Telcom and Cincinnati Bell are “almost twins,” Barber said.

They’re also about the same age: Hawaiian Telcom has been in business since 1883; Cincinnati Bell since 1873.

In an email sent to Cincinnati Bell employees on Monday, the Ohio-based company’s president and chief executive, Leigh Fox, said Hawaiian Telcom’s business strategy of growing its fiber optic network aligns with Cincinnati Bell’s business plan.

“The merger with Hawaiian Telcom gives us access to a well-developed, fiber-rich market in Honolulu and to the growing neighbor islands, which aligns with our Network Communications Business strategy to invest strategically in fiber,” Fox wrote.

Specifically, Fox pointed to the fact that Hawaiian Telcom has covered approximately 67 percent of its operating area with fiber. In addition, Cincinnati Bell said the deal will give the company access to a Trans-Pacific fiber cable capacity linking Asia and the United States, which Hawaiian Telcom expects will go online in the next few months.

Growth strategies aren’t the only similarity.

“It’s uncanny,” Fox said Monday on a conference call with investment analysts. “They have one competitor, and it’s the same competitor we have.”

In fact, Barber said that leading up to the deal, the two companies had been comparing notes on how to deal with Spectrum, the cable giant created by Charter Communications’ merger with Time Warner Cable and its Hawaii brand, Oceanic, which closed last month.

The deal with Cincinnati Bell, Barber said, helps Hawaiian Telcom compete with Spectrum.

“They’re literally 150 times our size, so we have to get scale to compete,” he said.

The companies expect the deal to close in the second half of 2018 if approved by shareholders and regulators. Fox said he did not foresee a problem getting approval.

“I’m actually hopping on a flight later this afternoon to go speak with regulators and local government and the Governor of Hawaii this week,” Fox told analysts on Monday. “So we’re doing everything we can to put our best foot forward.”

Under the agreement, Hawaiian Telcom stockholders will have the option to elect either $30.75 in cash, 1.6305 shares of Cincinnati Bell common stock, or a mix of $18.45 in cash and 0.6522 shares of Cincinnati Bell common stock for each share of Hawaiian Telcom stock, the companies reported.

The telecommunications industry is a tough, capital-intensive business, so much so that Hawaiian Telcom posted net income of just $1 million on revenue of $392.9 million in 2016, according to the company’s annual report. During the year, the company invested approximately $98 million, with 83 percent directed towards growth and expansion initiatives.

As a result, Cincinnati Bell described its proposed acquisition in terms of Hawaiian Telcom’s earnings before interest, taxes, depreciation and amortization, of EBITDA, a measure of operation cash flow. The $650 price is about 5.6 times the $116 million in EBITDA that Hawaiian Telcom reported in 2016.

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