Uniti: Opacity and Uncertainty Surrounding Windstream Acquisition Outweigh Any Opportunity; $4 FVE

After placing the stock under review following the Windstream merger announcement, we are relaunching coverage of Uniti with a $4 fair value estimate. The big decline from our previous Uniti fair value estimate of $12 is a function of stand-alone Uniti’s fractional level of equity relative to debt, the loss of real estate investment trust, or REIT, status, comparable debt leverage given the cash and preferred equity portions of the deal, and absent planned cost savings. It also reflects uncertainty around Windstream, especially the managed services business.