PAETEC, a privately-held supplier of communication solutions firm announced that it would acquire US LEC Corp., a telecommunication company.

US LEC Corp., a full-service provider of IP data and voice solutions, today agreed to a merger with PAETEC for $1.3 billion. Excluding debt, the value would be $450 million and the new entity known as PAETEC would be publicly-listed. The New York-based firm's shareholders would own two-thirds of the new entity, while the remaining third would go to shareholders in US LEC Corp.

"This merger create(s)...substantial opportunities for customers and offer(s) shareholders of both US LEC and PAETEC the ability to participate in the upside potential of the combined company,' said Richard Aab, Chairman of US LEC. This is an excellent fit from an operational and financial perspective. An important rationale for our merger is the cost savings we will be able to capture, as well as additional revenue synergies that have not yet been factored into our financial projections.'

As a combined entity, the company would generate nearly $1 billion in revenue and $109 million in free cash flow. The projected cost savings for the synergy effect would be $25 million in the fist year after closing and $40 million annually beginning in 2008. In the technology area, the new customer base would benefit from an enhanced capacity to deliver new, innovative communications services, according to Aab.

"We are excited to be combining with US LEC, said Arunas Chesonis, Chairman and Chief Executive Officer of PAETEC. "Given the complementary nature of the two companies' product and technology portfolios, as well as their geographic footprints, the new PAETEC will be well positioned to capitalize on significant cross-selling opportunities.'

The combined company would have over 45,000 enterprise customers, consisting of medium and large businesses and institutions. It would operate in 52 of the top 100 Metropolitan Service Areas (MSAs) in the U.S., with a leading presence in the Eastern U.S.

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