Alaska-born GCI is merging with a Colorado-based company in a $1.12 billion deal.
The merger between Liberty Ventures Group and Alaska’s largest telecommunication company was announced this morning. GCI’s NASDAQ price soared over 62 percent before the markets closed, ending the day at $33.39.
The markets evidently liked the transaction. So will GCI shareholders, who will receive $32.50 for each share, a 58 percent premium.
“This transaction is a win for our shareholders, customers, and employees,” said Ron Duncan, GCI co-founder, president, and chief executive officer.
The merged entity will be called GCI Liberty and is expected to remain listed as a publicly traded NASDAQ stock.
GCI customers probably won’t notice the change; Duncan will keep running the company, which has about 2,300 employees, making it among the top 10 private sector employers in the state.
ECONOMICS 101, POLITICS 400
Duncan was circumspect in his official statement about the merger.
“We will continue to run the company with our focus on providing the best value for Alaska customers, offering opportunities for our employees and investing wisely in the Alaska market,” he said, in a well-scrubbed corporate statement. “As part of a larger company, GCI will be even better positioned to compete, innovate, and serve Alaskans and our customers in the lower 48 states.”
Duncan said not a word about the economic conditions and political realities in Alaska.
Yet those who know the entrepreneur understand that the deal is also a punctuation on a message Duncan has been driving home about Alaska’s economic stability for three years.
Duncan, who has not been shy about supporting political candidates throughout his career, went big over the past two years trying to move the needle on a solution for the State’s deficit spending juggernaut, because he saw storm clouds ahead for the general economy if leaders didn’t act decisively.
The telecommunications president was invited to help Gov. Bill Walker figure out a solution to the problem. He and a handful of other top business leaders pored over financial plans and offered their own studied advice.
Then, Duncan ended up forming a political group, Alaska’s Future, to encourage lawmakers to do the tough work needed to “lengthen the runway” on Alaska’s fiscal crisis. They spent millions trying to educate the public about the pending economic trainwreck.
That group was especially interested in a proposed plan to restructure the Alaska Permanent Fund’s Earnings Reserve Account, to help pay for state services. It was certainly a big part of the solution, he said. And while the State has over $55 billion in the Permanent Fund, many economists say the earnings should be used more effectively right now to steady the ship.
Alaska’s Future co-chairs were former Democratic Gov. Tony Knowles, AFL-CIO President Vince Beltrami, and Alaska Native corporation CEOs, Helvi Sandvik of NANA Regional Corp. and Sophie Minich of Cook Inlet Region Inc.
NEW YEAR, SAME PROBLEM, SHORTER RUNWAY
In 2017, the Alaska House of Representatives is still having trouble coming to consensus over a path forward. Per capita State spending remains higher than any other state in the union at about $16,000 per resident. The average in other states is $5,300 per person.
And the House leadership, now dominated by Democrats, has just offered a budget even larger than the one proposed by Gov. Bill Walker.
The Senate gets it. In their presentation to a combined audience of the RDC [Resource Development Council] and State Chamber last week, their plan is aggressive on cuts. If they do just what they have on the table — $200 million, plus Senate Bill 26, that’s a six- or seven-year lease on life. – Ron Duncan
“You don’t have to fill the whole hole. If the hole is $400 million, that’s eight years before we run out of reserves, and they will figure it out in those years.”
Senate Bill 26 uses Permanent Fund earnings, not principle, to provide a big patch.
But waiting on the Alaska House to come to terms with a plan added a bit too much uncertainty in an already risk-heavy economic environment.
GCI took its own steps toward fiscal certainty with today’s announcement.
It’s all about spreading out the risk, Duncan told Must Read Alaska this afternoon. “Instead of 100 percent risk exposure in Alaska, we now have 25 percent.”
WARNING WAS NOT A THREAT
Last year, Duncan advised lawmakers that private sector companies would be pulling back their investments if Alaska didn’t get its fiscal house in order.
Some hard-left operatives, such as Rep. Les Gara, D-Anchorage, called it a threat. In his January, 2016 newsletter, Gara glibly wrote, “Of course, Mr. Duncan can choose to do what he wants. It’s a free country. I just wish he would consider how this threatens to undermine a collaborative political process, which requires something better than suggestions of campaign threats.”
But Duncan wasn’t kidding when he warned legislators about the $3 billion shortfall. Job creators have their own way of seeing things, and with his company posting a loss last year, and with oil-related workers leaving the state by the thousands, Duncan pulled back his capital investment by 25 percent for 2017.
INVESTMENT OVER THE DECADES: GINORMOUS
Duncan is in his 40th year in Alaska. He came north in 1977 with some Alaska friends he met at Harvard, where he had attended graduate school after obtaining an economics degree from Johns Hopkins University.
He started a cable television company in Fairbanks and two years later moved to Anchorage, where he and his friend Bob Walp started GCI.
The two battled mightily through regulatory minefields to get a toehold in the long-distance business, completing their company’s first long-distance call on Thanksgiving Day, 1982. Walp, who had been the CEO, retired from GCI in 1989, and passed away earlier this year.
In 2011, the company started the TERRA project to expand its communications network to rural and remote areas of Alaska. The project now provides more than 80 villages with access to terrestrial broadband.
In 2016, GCI added Buckland, Kiana, Noorvik, Selawik, Koyuk, Elm, Golovin, White Mountain, Stebbins and St. Michael to the network, which involves microwave radio towers that brought 3G wireless data service to several dozen tiny and remote communities.
GCI is Alaska’s largest communications provider, with more than 100,000 Internet and video subscribers each, and 200,000 wireless customers. GCI’s revenue was $934 million in 2016, a drop from $979 million the previous year.