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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 2, 1998
MCLEODUSA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-20763 42-1407240
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NUMBER)
OF INCORPORATION)
MCLEODUSA TECHNOLOGY PARK
6400 C STREET, S.W., P.O. BOX 3177, CEDAR RAPIDS, IA 52406-3177
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (319) 364-0000
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
PROPOSED PRIVATE DEBT OFFERING
Before the opening of The Nasdaq Stock Market, Inc.'s National Market System
("Nasdaq NMS") on the morning of October 22, 1998, the Company issued a press
release announcing that it plans to raise approximately $200 million in a
proposed private offering of senior notes due 2008 (i) to "qualified
institutional buyers"(as defined in Rule 144A under the Securities Act of
1933) and (ii) pursuant to offers and sales that occur outside the United
States in accordance with Regulation S under the Securities Act of 1933.
Enclosed as Exhibit 99.1 to this Current Report on Form 8-K, and incorporated
by reference herein, is the text of the press release issued by the Company on
the morning of October 22, 1998.
After the close of the Nasdaq NMS on October 22, 1998, the Company issued a
second press release to announce an increase in the amount of debt it plans to
raise from $200 million to approximately $300 million in its proposed private
offering of 9.500% senior notes due November 1, 2008. Enclosed as Exhibit 99.2
to this Current Report on Form 8-K, and incorporated by reference herein, is
the text of the press release issued by the Company on the evening of
October 22, 1998.
AGREEMENT TO ACQUIRE DAKOTA TELECOMMUNICATIONS GROUP, INC.
On October 27, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Dakota Telecommunications Group, Inc., a
Delaware corporation ("DTG"), pursuant to which a newly formed wholly owned
subsidiary of the Company will be merged with and into DTG (the "Merger"). As
a result of the Merger, each share of DTG's common stock will be converted
into the right to receive 0.4328 of a share of the Company's Class A common
stock (the "Exchange Ratio"). The maximum number of shares of the Company's
Class A common stock issuable pursuant to the Merger (assuming the exercise of
all outstanding options to purchase DTG common stock) is expected to be
approximately 1,295,000. In addition, under the terms of the Merger Agreement,
each option to purchase DTG common stock will become or be replaced by an
option to purchase a number of shares of the Company's Class A common stock
equal to the number of shares of DTG common stock that could have been
purchased (assuming full vesting) under the DTG stock option multiplied by the
Exchange Ratio. The Company has agreed to register under the Securities Act of
1933 the shares of its Class A common stock to be issued in the Merger.
Consummation of the Merger is subject to the satisfaction of certain
conditions, including (i) approval of the Merger Agreement and the Merger by
the stockholders of DTG, (ii) effectiveness of the registration statement
registering the shares of the Company's Class A common stock to be issued in
the Merger, (iii) compliance with all applicable provisions of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 and the expiration of all applicable
waiting periods thereunder, (iv) receipt of required regulatory approvals and
(v) certain other customary conditions. Each director and certain executive
officers of DTG have entered into Voting Agreements pursuant to which, among
other things, they have agreed to vote their shares of DTG common stock in
favor of the Merger at a meeting of the stockholders of DTG.
Enclosed as Exhibit 99.3 to this Current Report on Form 8-K, and
incorporated by reference herein, is the text of the October 27, 1998 Press
Release.
EXECUTIVE REALIGNMENT
On September 2, 1998, the Company issued a press release announcing an
executive realignment involving five executives of the Company. The Company
has segmented its ten-state geographical service area into four regions and
appointed a Regional President for each region. In addition, the Company
appointed a new Group Vice President of Finance and Chief Financial Officer.
Enclosed as Exhibit 99.4 to this Current Report on Form 8-K, and incorporated
by reference herein, is the text of the September 2, 1998 Press Release.
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Certain statements contained in this Current Report on Form 8-K are forward-
looking statements that involve risks and uncertainties, including, but not
limited to revision of expansion plans, availability of financing and
regulatory approvals, the number of potential customers in a target market,
the existence of strategic alliances or relationships, technological,
regulatory or other developments in the Company's business, changes in the
competitive climate in which the Company operates and the emergence of future
opportunities, all of which could cause actual results and experiences of
McLeodUSA Incorporated to differ materially from anticipated results and
expectations expressed in the forward-looking statements contained herein.
These and other applicable risks are summarized under the caption "Business-
Risk Factors" and elsewhere in the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1997, which is filed with the Securities
and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
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99.1 Press Release, dated October 22, 1998, announcing the Company's intent to
raise up to $200 million in a proposed private debt offering of senior
notes due 2008.
99.2 Press Release, dated October 22, 1998, announcing the Company's intent to
raise up to $300 million in a proposed private debt offering of senior
notes due 2008.
99.3 Press Release, dated October 27, 1998, announcing the Company's execution
of a definitive agreement to acquire Dakota Telecommunications Group,
Inc., a South Dakota based telecommunications firm.
99.4 Press Release, dated September 2, 1998, announcing the Company's
executive realignment.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
McLeodUSA Incorporated
Date: October 29, 1998
/s/ Randall Rings
By: _________________________________
RANDALL RINGS
VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
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99.1 Press Release, dated October 22, 1998,
announcing the Company's intent to raise up
to $200 million in a proposed private debt
offering of senior notes due 2008.
99.2 Press Release, dated October 22, 1998,
announcing the Company's intent to raise up
to $300 million in a proposed private debt
offering of senior notes due 2008.
99.3 Press Release, dated October 27, 1998,
announcing the Company's execution of a
definitive agreement to acquire Dakota
Telecommunications Group, Inc., a South
Dakota based telecommunications firm.
99.4 Press Release, dated September 2, 1998,
announcing the Company's executive
realignment.
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EXHIBIT 99.1
[MCLEODUSA LOGO APPEARS HERE]
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
[email protected]
Phone: (319) 298-7800
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
MCLEODUSA ANNOUNCES PROPOSED PRIVATE DEBT OFFERING
Cedar Rapids, Iowa, October 22, 1998--McLeodUSA Incorporated
(NASDAQ/NMS:MCLD), announced today it plans to raise approximately $200
million in a proposed private offering of senior notes to "qualified
institutional buyers" as defined in Rule 144A under the Securities Act of 1933
and pursuant to offers and sales that occur outside the United States in
accordance with Regulation S under the Securities Act of 1933.
The senior notes proposed to be offered by McLeodUSA will not be registered
under the Securities Act of 1933 or any state securities laws and, unless so
registered may not be offered or sold except pursuant to an applicable
exemption from the registration requirements of the Securities Act of 1933 and
applicable state securities laws.
This press release shall not constitute an offer to sell or the solicitation
of an offer to buy the proposed senior notes.
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EXHIBIT 99.2
[MCLEODUSA LOGO APPEARS HERE]
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
[email protected]
Phone: (319) 298-7800
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
MCLEODUSA PROPOSED PRIVATE DEBT OFFERING--UPDATE
Cedar Rapids, Iowa, October 22, 1998--McLeodUSA Incorporated
(NASDAQ/NMS:MCLD), announced today an update of its plans for a proposed
private offering of senior notes. The Company now plans to raise approximately
$300 million due November 1, 2008 in a proposed offering of 9.5% senior notes
to "qualified institutional buyers" as defined in Rule 144A under the
Securities Act of 1933 and pursuant to offers and sales that occur outside the
United States in accordance with Regulations S under the Securities Act of
1933.
The senior notes proposed to be offered by McLeodUSA will not be registered
under the Securities Act of 1933 or any state securities laws and, unless so
registered may not be offered or sold except pursuant to an applicable
exemption from the registration requirements of the Securities Act of 1933 and
applicable state securities laws.
This press release shall not constitute an offer to sell or the solicitation
of an offer to buy the proposed senior notes.
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EXHIBIT 99.3
[MCLEODUSA LOGO APPEARS HERE]
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McLeodUSA Incorporated Dakota Telecommunications Group, Inc.
McLeodUSA Technology Park 29705 453rd Avenue
6400 C Street SW, PO Box 3177 Irene, South Dakota 57037-0066
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz Press and Investor Contact: Craig A. Anderson
[email protected] [email protected]
Phone: (319) 298-7800 Phone: (605) 338-8383
FAX: (319) 298-7767 FAX: (605) 335-3942
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FOR IMMEDIATE RELEASE
MCLEODUSA AND DAKOTA TELECOMMUNICATIONS GROUP, INC.
SIGN MERGER AGREEMENT
MERGER MOBILIZES MAINSTREET PLAY IN THE DAKOTAS
CEDAR RAPIDS, IOWA, AND IRENE, SOUTH DAKOTA --OCTOBER 27, 1998--McLeodUSA
Incorporated (NASDAQ/NMS:MCLD), a provider of integrated telecommunications
services in Midwest and Rocky Mountain states, and Dakota Telecommunications
Group, Inc. (DTG), a South Dakota-based competitive local exchange carrier,
today announced they have signed a definitive agreement to merge their
companies. The stock transaction will involve the issuance of 1.28 million
shares of McLeodUSA stock and the assumption of $30.9 million in debt. The
transaction is subject to a number of conditions, including both DTG
stockholder approval and regulatory approval.
DTG, headquartered in Irene, South Dakota, traces its history back to 1903.
Today, DTG offers an array of integrated communications products including
local and long distance phone services; cable television; Internet access and
web site services; operator services; wireless communications including
paging, mobile radio and cellular; and computer networking services. DTG has
188 employees with offices in Irene, Sioux Falls, Canton, Viborg and Yankton,
SD, and in Marshall, MN. For the nine months ended September 30, DTG recorded
revenues of approximately $25 million and positive EBITDA of $2.5 million.
Steve Gray, President and Chief Operating Officer of McLeodUSA stated, "This
acquisition fits hand in glove with our overall strategy. DTG operates in
three of our key upper Midwest states, offering nearly identical, fiber optic-
based services in third and fourth-tier cities. The management team at DTG
shares our commitment to bringing state-of-the-art communications to markets
where the incumbent phone and cable television companies often fail to invest
in new technologies and system upgrades."
Upon closing, McLeodUSA will gain approximately 300 route miles of fiber
optic network, 7,300 facility-based local access lines, 5,900 cable television
subscribers, and 6,800 Internet accounts. "Perhaps the most valuable addition
for McLeodUSA," stated Gray, "is the addition of a motivated employee team of
telecommunications professionals with a clear focus on a key market area for
McLeodUSA. DTG has the infrastructure and organizational capabilities to
accelerate our penetration as a facilities-based provider in that region."
Thomas Hertz, CEO of Dakota Telecommunications Group, stated, "We look
forward to joining forces with the outstanding team of 5,000 at McLeodUSA.
Together we possess significant talent, energized by the opportunity created
by the opening of the local markets to competition. Both firms have made
significant inroads in their markets in the Dakotas in recent years. Together,
we will be able to offer current and future customers even better services at
greater value, with increased reliability on our fiber-based network."
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MainStreet is the McLeodUSA project name for constructing fiber optic
network in selected communities to connect directly to customers. Gray: "The
presence DTG has established in numerous communities will help accelerate our
MainStreet penetration. In addition, the McLeodUSA name is already well known
throughout South Dakota in that our Publishing Company recently announced that
our familiar black cover directories with the gold star now cover every
community in the state."
Dakota Telecommunications Group, Inc. is one of the first Competitive Local
Exchange Carriers to build new facilities in the smaller communities in South
Dakota, Iowa and Minnesota. In 1998, it completed four new systems in
Centerville, Viborg, Harrisburg, and Tea, South Dakota; and is currently
building a new system in Canton, South Dakota.
McLeodUSA, founded in June of 1991, is a provider of integrated
telecommunications services to business and residential customers. The
Company's telecommunications customers are located in ten Midwest and Rocky
Mountain states; future expansion will add 4 additional states. McLeodUSA is a
facilities-oriented telecommunications provider with 7 switches, 344,000 local
lines, 5,000 employees, and nearly 5,600 route miles of fiber optic network.
In the next 12 months, the Company's publishing subsidiaries will distribute
nearly 16 million copies of competitive directories in 20 states, reaching 27
million people or 10 percent of the nation's population.
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EXHIBIT 99.4
[MCLEODUSA LOGO APPEARS HERE]
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
[email protected]
Phone: (319) 298-7800
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
MCLEODUSA INCORPORATED ANNOUNCES EXECUTIVE REALIGNMENT
Cedar Rapids, Iowa, September 2, 1998--McLeodUSA Incorporated
(NASDAQ/NMS:MCLD), a provider of integrated telecommunications services in
Midwest and Rocky Mountain states, today announced a realignment involving
five executives of the Company.
Steve Gray, President and COO of McLeodUSA stated, "This action is a direct
result of the progress we have achieved in our long-term strategy to become a
facilities-based provider. As we begin migrating customers onto the McLeodUSA
network and switches, we have the opportunity to continue to build our
relationships with our customers and communities. We have decided to segment
our current ten-state geography into four regions and assign an existing
executive to lead each region."
Effective immediately, McLeodUSA named the following Regional Presidents:
. Dennis L. Erickson: Indiana, Illinois and Wisconsin;
. Blake O. Fisher, Jr.: Iowa and Minnesota;
. Steven J. Shirar: Missouri;
. David M. Boatner: Colorado, Wyoming, North Dakota and South Dakota.
J. Lyle Patrick, previously Executive Vice President at McLeodUSA, has been
named Group Vice President of Finance and Chief Financial Officer. The CFO
title was previously held by Blake Fisher, now President of the Iowa/Minnesota
Region. Mr. Patrick has been with McLeodUSA since the completion of the merger
with Consolidated Communications Inc. last September. He has assisted Mr.
Fisher with recent financing and acquisition activities, and was CFO of
Consolidated Communications prior to the merger.
Gray continued, "This realignment is quite simply the best use of our key
executives. Blake was ready for a new challenge as President of a Region, but
will continue to serve on the Finance Committee and as a member of the Board
of Directors. Lyle has a great deal of industry experience, as demonstrated by
his election in February as Chairman of the CompTel Board of Directors."
McLeodUSA, founded in June of 1991, is a provider of integrated
telecommunications services to business and residential customers. The
Company's telecommunications customers are located in ten Midwest and Rocky
Mountain states; future expansion will add four additional states. McLeodUSA
is a facilities-oriented telecommunications provider with seven switches,
344,000 local lines, 5,000 employees, and nearly 5,600 route miles of fiber
optic network. In the next 12 months, the Company's publishing subsidiaries
will distribute nearly 16 million copies of competitive directories in 20
states, reaching 27 million people or 10 percent of the nation's population.
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