Business Context and Reporting Period
This Form 8-K, dated July 1, 2009, reports the completion of the merger between CenturyTel, Inc. and Embarq Corporation. As of this date, Embarq became a wholly-owned subsidiary of CenturyTel. The company announced it will begin conducting business under the brand name "CenturyLink," with a formal name change to "CenturyLink, Inc." expected upon shareholder approval in May 2010.
Key Financial Metrics and Transaction Details
- Transaction Value: Approximately $6.0 billion in CenturyTel (CTL) common stock was delivered to Embarq stockholders, based on June 30, 2009 share counts and closing prices.
- Exchange Ratio: Each outstanding share of Embarq common stock was converted into the right to receive 1.37 shares of CTL common stock, with cash paid in lieu of fractional shares.
- Ownership Structure: Immediately following the merger, former Embarq stockholders held approximately 66% of the outstanding CTL common stock.
- Financial Statements: The filing incorporates Embarq's consolidated financial statements for the quarters ended March 31, 2009 and 2008, and the years ended December 31, 2008, 2007, and 2006, as Exhibit 99.4.
- Pro Forma Data: Unaudited pro forma combined condensed financial information is expected to be filed within 71 calendar days of this report.
Note: This filing does not provide specific revenue, profit, cash flow, or debt figures for the combined entity; it only references the attached historical statements of the acquired company.
Material Changes Versus Prior Period
- Corporate Structure: CenturyTel eliminated its time-phase voting structure, which previously granted ten votes per share to long-term holders. The new structure provides one vote per share.
- Authorized Shares: The authorized number of common shares increased from 350 million to 800 million.
- Board Composition: The Board of Directors expanded from 12 to 15 members. Four incumbent directors retired, and seven former Embarq directors were appointed.
- Executive Leadership: Glen F. Post, III was appointed Chief Executive Officer and President. Thomas A. Gerke was appointed Executive Vice Chairman. Three new executive officers were appointed from Embarq.
Guidance, Outlook, and Management Commentary
- Integration: Management indicated that Mike Maslowski, a former executive officer, will assist with merger integration activities before retiring later in the year.
- Regulatory Status: The merger was completed following the receipt of final required regulatory approvals on June 25, 2009.
- Compensation: New directors received grants of restricted stock vesting over three years or upon change of control. William A. Owens, appointed Chairman, received an additional grant vesting in one year.
- Risks and Contingencies: The filing notes that representations and warranties in the Merger Agreement were made for specific contractual purposes and may not reflect matters as facts for investors. Certain directors were granted waivers regarding the limit on serving on unaffiliated public company boards.
Important Facts for Investor Verification
- Verify the specific financial impact of the merger by reviewing the unaudited pro forma financial information expected to be filed within 71 days.
- Review the consolidated financial statements of Embarq (Exhibit 99.4) to assess the acquired entity's historical performance and debt levels.
- Monitor the shareholder vote scheduled for May 2010 regarding the formal name change to "CenturyLink, Inc."
- Confirm the integration progress and the timeline for Mike Maslowski's retirement.
- Examine the new indemnification agreements and bylaw amendments regarding board committee powers and officer authority.