No Sale: Citizens pays special dividend; Tow retires

After essentially putting itself on the auction block in December, Citizens Communications today announced that the end result of its financial alternatives will be a $2 per share special dividend and the establishment of a $1 per share annual dividend. Additionally, Leonard Tow, who has served as chairman and president since 1990, will retire from the company at the end of the year.

Citizens, which had been one of the most aggressive acquirers of rural access lines in the past five years, had been the subject of several rumors recently that claimed a consortium of private equity firms was forming to acquire the company. However, according to one source who didn’t want to be named, the price the group was placing on Citizens was significantly lower than the company wanted.

"This is a natural evolution of what we set out to do," Jerry Elliott, chief financial officer, said today during a call with analysts.

Elliott added that while the company may continue to look for acquisitions, the issue of selling off specific access lines is not on the table any more. "This is the completion of the process," he said. "This is the firm conviction of the board to deliver value. We’ve absolutely come to the conclusion that the growth strategy of this company is internal."

The special dividend will be paid to shareholders of record as of Aug. 18 and will be delivered on Sept. 2. Among the bigger shareholders is Tow, who along with his wife, Claire, who sits on the board, reported just over 6.4 million shares. As previously announced, with the announced completion of the evaluation process, Scott Schneider, president of Citizens, also will be leaving the company but will remain on the board of directors.

A search for a new CEO already has begun and will be conducted by a committee of directors. Rudy Graf, Robert Stanger, and David H. Ward. Graf, who previously was president, will fill the interim CEO slot. According to Graf, the group is looking at several potential options for the CEO and wouldn’t necessarily restrict themselves to candidates from the RLEC market.

"There are a number of terrific candidates out there," he said during the analyst call. "We’re not in a mad rush but we do want to resolve that issue for ourselves. Ideally it would be someone who has telecom experience, but I don’t want to limit ourselves to people in the space."