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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): March 31, 1999
McLEODUSA INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 0-20763 42-1407240
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Incorporation) Identification Number)
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 2. Acquisition or Disposition of Assets
Acquisition of Ovation Communications, Inc.
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On March 31, 1999, McLeodUSA Incorporated ("McLeodUSA") acquired Ovation
Communications, Inc. ("Ovation"), a privately held Delaware corporation, through
the merger (the "Merger") of Ovation with and into Bravo Acquisition
Corporation, a newly formed Delaware corporation and wholly-owned subsidiary of
McLeodUSA. The Merger occurred pursuant to the Agreement and Plan of Merger,
dated as of January 7, 1999, among McLeodUSA, Bravo Acquisition Corporation,
Ovation and several stockholders of Ovation (the "Merger Agreement").
As a result of the Merger, Ovation securityholders received an aggregate of
5,596,617 shares of McLeodUSA's Class A common stock and approximately $121.3
million in cash. In addition, all options to acquire Ovation common stock
granted under Ovation's 1997 Stock Option Plan that were outstanding and
unexercised immediately prior to the effective time were assumed by McLeodUSA
and were replaced with options to purchase McLeodUSA Class A common stock. The
number of shares of McLeodUSA Class A common stock subject to the replaced
options and the exercise price of such options were adjusted based upon the
merger consideration. In addition, McLeodUSA retired approximately $105.6
million of the outstanding debt of Ovation at the time of the transaction. At
the effective time of the Merger, Bravo Acquisition Corporation changed its name
to Ovation Communications, Inc.
The consideration for the Merger was determined through arm's-length
negotiations between McLeodUSA and Ovation. McLeodUSA will record the Merger as
a purchase for accounting purposes.
Ovation is a diversified communications services company serving business
customers primarily in larger metropolitan areas in Minnesota, Illinois and
Wisconsin (such as Minneapolis/St. Paul, Chicago and Milwaukee) and in small to
mid-sized cities in Michigan. Ovation provides the following services:
. local and network access
. local and long distance telephone
. voice mail, teleconferencing and calling card
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. Internet access
As of December 31, 1998, Ovation served approximately 32,650 business local
lines and 12,900 residential local lines to approximately 2,900 business
customers and 11,750 residential customers in 135 cities and towns. Ovation had
1998 revenues of $21.5 million, including revenues received between October 1,
1998 and December 31, 1998 as a result of Ovation's acquisition of BRE
Communications, L.L.C. d/b/a Phone Michigan on October 1, 1998. As of December
31, 1998, Ovation had four switches, approximately 564 miles of fiber optic
communications network and 384 employees. McLeodUSA intends to operate Ovation
in a manner similar to the way it was operated prior to the Merger.
The foregoing description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement,
filed with the Securities and Exchange Commission on January 14, 1999 as Exhibit
2.1 to our Current Report on Form 8-K. A copy of the press release, dated
March 31, 1999, issued by McLeodUSA, announcing its completion of the Merger is
attached hereto as Exhibit 99.1 and incorporated herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The financial statements and exhibits listed below are incorporated by
reference to financial statements and exhibits to previously filed registration
statements or reports of McLeodUSA with the Securities and Exchange Commission
as indicated.
(a) Financial Statements of business acquired
Description
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The Balance Sheets of Ovation Communications, Inc. as of December 31, 1998
and 1997 (Incorporated herein by reference to McLeodUSA's Form S-4, No.
333-71811, filed with the Securities and Exchange Commission on February 4,
1999, as amended by Amendment No. 1, filed on February 18, 1999, as further
amended by Amendment No. 2, filed on March 15, 1999, and as further amended
by Amendment No. 3, filed on March 24, 1999 (together, "McLeodUSA's Form
S-4")).
Statements of Operations of Ovation Communications, Inc. for the period
from March 27, 1997 (date of inception) through December 31, 1997 and the
year ended December 31, 1998. (Incorporated herein by reference to
McLeodUSA's Form S-4).
Statements of Changes in Stockholders' Equity of Ovation Communications,
Inc. for the period from March 27, 1997 (date of inception) through
December 31, 1997 and the year ended December 31, 1998. (Incorporated
herein by reference to McLeodUSA's Form S-4).
Statements of Cash Flows of Ovation Communications, Inc. for the period
from March 27, 1997 (date of inception) through December 31, 1997 and the
year ended December 31, 1998. (Incorporated herein by reference to
McLeodUSA's Form S-4).
Notes to Financial Statements of Ovation Communications, Inc. dated
December 31, 1998. (Incorporated herein by reference to McLeodUSA's
Form S-4).
Report of Independent Auditors dated February 26, 1999. (Incorporated
herein by reference to McLeodUSA's Form S-4).
(c) Exhibits.
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2.1 Agreement and Plan of Merger, dated as of January 7, 1999, by and among McLeodUSA Incorporated, Bravo
Acquisition Corporation, Ovation Communications, Inc. and certain stockholders of Ovation
Communications, Inc. (Incorporated herein by reference to Exhibit 2.1 to McLeodUSA's Current Report
on Form 8-K, File No. 0-20763, filed with the Commission on January 14, 1999).
99.1 Press Release, dated March 31, 1999, announcing completion of the acquisition of Ovation.
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99.2 The Balance Sheets of Ovation Communications, Incorporated herein by reference to
Inc. as of December 31, 1998 and 1997. McLeodUSA's Form S-4, No. 333-71811,
filed on February 4, 1999, as
amended by Amendment No. 1, filed on
February 18, 1999, as further
amended by Amendment No. 2, filed
on March 15, 1999, and as further
amended by Amendment No. 3, filed on
March 24, 1999 (together, the
"McLeodUSA's Form S-4").
99.3 Statements of Operations of Ovation Incorporated herein by reference to
Communications, Inc. for the period from McLeodUSA's Form S-4.
March 27, 1997 (date of inception)
through December 31, 1997 and the year
ended December 31, 1998.
99.4 Statements of Changes in Stockholders' Incorporated herein by reference to
Equity of Ovation Communications, Inc. McLeodUSA's Form S-4.
for the period from March 27, 1997 (date
of inception) through December 31, 1997
and the year ended December 31, 1998.
99.5 Statements of Cash Flows of Ovation Incorporated herein by reference to
Communications, Inc. for the period from McLeodUSA's Form S-4.
March 27, 1997 (date of inception) through
December 31, 1997 and the year ended
December 31, 1998.
99.6 Notes to Financial Statements of Ovation Incorporated herein by reference to
Communications, Inc. dated December 31, 1998. McLeodUSA's Form S-4.
99.7 Report of Independent Auditors dated February Incorporated herein by reference to
26, 1999. McLeodUSA's Form S-4.
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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.
Date: April 15, 1999 McLeodUSA Incorporated
By: /s/ Randall Rings
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Randall Rings
Vice President, Secretary and
General Counsel
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EXHIBIT INDEX
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2.1 Agreement and Plan of Merger, dated as of January 7, 1999, by and among McLeodUSA Incorporated, Bravo
Acquisition Corporation, Ovation Communications, Inc. and certain stockholders of Ovation
Communications, Inc. (Incorporated herein by reference to Exhibit 2.1 to McLeodUSA's Current Report
on Form 8-K, File No. 0-20763, filed with the Commission on January 14, 1999).
99.1 Press Release, dated March 31, 1999, announcing completion of the acquisition of Ovation.
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99.2 The Balance Sheets of Ovation Communications, Incorporated herein by reference to
Inc. as of December 31, 1998 and 1997. McLeodUSA's Form S-4, No. 333-71811,
filed on February 4, 1999, as
amended by Amendment No. 1, filed on
February 18, 1999, as further
amended by Amendment No. 2, filed
on March 15, 1999, and as further
amended by Amendment No. 3, filed on
March 24, 1999 (together, the
"McLeodUSA's Form S-4").
99.3 Statements of Operations of Ovation Incorporated herein by reference to
Communications, Inc. for the period from McLeodUSA's Form S-4.
March 27, 1997 (date of inception)
through December 31, 1997 and the year
ended December 31, 1998.
99.4 Statements of Changes in Stockholders' Incorporated herein by reference to
Equity of Ovation Communications, Inc. McLeodUSA's Form S-4.
for the period from March 27, 1997 (date
of inception) through December 31, 1997
and the year ended December 31, 1998.
99.5 Statements of Cash Flows of Ovation Incorporated herein by reference to
Communications, Inc. for the period from McLeodUSA's Form S-4.
March 27, 1997 (date of inception) through
December 31, 1997 and the year ended
December 31, 1998.
99.6 Notes to Financial Statements of Ovation Incorporated herein by reference to
Communications, Inc. dated December 31, 1998. McLeodUSA's Form S-4.
99.7 Report of Independent Auditors dated February Incorporated herein by reference to
26, 1999. McLeodUSA's Form S-4.
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Exhibit 99.1
[Company Logo]
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, PO Box 3177
Cedar Rapids, IA 52406-3177
Press & Investor Contact: Bryce Nemitz
Phone: (319) 790-7800
FAX: (319) 790-7767
http://www.mcleodusa.com
FOR IMMEDIATE RELEASE
McLeodUSA and Ovation Communications Complete Merger
Cedar Rapids, Iowa -- March 31, 1999 -- McLeodUSA Incorporated
(NASDAQ/NMS: MCLD) and Ovation Communications, Inc. today announced the
completion of a previously announced merger that combines the two rapidly
expanding Competitive Local Exchange Carriers (CLECs). The two companies
jointly announced their intent to merge on January 7.
Effective immediately, the new combined company will be known as
McLeodUSA Incorporated and continues its stated mission to become the number one
provider and most admired company in our communities.
"Today marks a significant milestone for our ongoing strategic
growth," said Steve Gray, McLeodUSA President and COO. "Customers of both
organizations will benefit from this merger, which creates a dominant,
pervasive, facilities-based Super Regional company serving business and
residential customers in 11 states."
Tim Devine, former Ovation CEO and President, now a McLeodUSA Group
Vice President, agrees: "This merger signals the strong advancement of
competitive telecommunications in our service area. As our telephone networks
grow and service offerings expand, McLeodUSA is providing customers a real
solution for the evolving nature and importance of how people communicate."
Ovation, a Minneapolis-based firm, primarily served customers in the
upper Midwest, including Minneapolis-St. Paul, Chicago, Milwaukee and several
Michigan cities.
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McLeodUSA, founded in June 1991, is a publicly traded firm
headquartered in Cedar Rapids, Iowa, providing integrated telecommunications
services to businesses and residential customers. Customers are located in an
eleven-state area that includes Colorado, Iowa, Illinois, Indiana, Michigan,
Minnesota, Missouri, North Dakota, South Dakota, Wisconsin and Wyoming.
Products offered include local and long distance services, Internet access,
voice mail, paging, teleconferencing and calling card services. McLeodUSA is
one of the largest independent publishers of yellow and white page telephone
directories in the country. In the next 12 months, the Company's publishing
subsidiaries will distribute nearly 21 million copies of competitive directories
in 21 states, reaching 33 million people.
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