June 20, 2002 -- Florida East Coast Industries, Inc. said today that it has hired Morgan Stanley to explore the sale of the company's telecom unit, EPIK Communications.
"We believe at this time it is appropriate to explore strategic transactional alternatives for EPIK," said Robert W. Anestis, chairman and chief executive officer of FECI. "There is overcapacity in the industry, and consolidation among competitors could reduce costs and strengthen service offerings for customers."
EPIK's network links the major metropolitan centers of Florida with Atlanta and the submarine cable landing stations near Miami. Florida markets served include Miami, Orlando, Jacksonville, Tampa, Fort Myers, Fort Lauderdale, Melbourne, Daytona and St. Augustine.
The network includes approximately 1,850 intercity route miles (approximately 278,000 fiber-strand miles) and approximately 450 metro-ring route miles (approximately 19,500 fiber-strand miles). Construction of the network was completed in late 2001.
EPIK operated at break-even net cash flow in the first quarter of this year, according to FECI, which estimated the book value of EPIK's operating net assets (assets minus third party liabilities) at approximately $200 million.
However, it acknowledged that it is unlikely a sale of EPIK can fetch that amount.
"If the company consummates a transaction involving EPIK, it likely would be for less than the book value, which would result in a non-cash charge to earnings," FECI said in a statement. "In the event a transaction occurs at an amount less than EPIK's tax basis, which was approximately $305 million at March 31, 2002, it is also possible that FECI will derive income tax return benefits from the loss.
Florida East Coast Industries, Inc. is headquartered in St. Augustine, Fla., and owns 7.2 million square feet of commercial and industrial space, a regional freight railroad and an intermodal trucking company along with EPIK.