Description

Overview

Cogent Communications is the lowest-cost provider of fiber-only internet connectivity in its targeted end markets.  Its core business today sells connectivity into two primary end markets: direct internet access (DIA) and VPN services for corporate customers (57% of revenue) in large multi-tenant office buildings, and wholesale IP transit services, transacted out of carrier neutral data centers (CNDCs). 

Led by financially disciplined founder/owner/operator CEO Dave Schaeffer, Cogent assembled much of its business by acquiring >15 distressed telecom companies, restructuring their organizations and networks by shedding unwanted lines of business and staff.  Over its first decade of operations, it acquired companies that had raised and invested over $14b of capital for $60m in cash. 

A significant asymmetry exists today because of Cogent’s recently announced acquisition of T-Mobile’s Wireline business (which was acquired from Sprint, henceforth referred to as Sprint Wireline).  Sprint Wireline is Cogent’s first acquisition since 2005 and will be transformative to Cogent’s FCF generation, balance sheet and cost structure, while also opening new addressable markets which Cogent can enter aggressively since it is being paid $700m in cash to acquire the business.  I estimate this acquisition will be more than 100% accretive to standalone FCF and >75% accretive to EBITDA by 2028. 

Today, Cogent offers compelling risk/reward with a ~7% forward dividend yield that grows with FCF and visibility into materially accelerating FCF/share growth after the Sprint Wireline deal closes.  On 2028 estimated dividends, I believe the stock is currently trading at a 20-25% yield.

Cogent is a small company but operates in unique end markets worth explaining in some detail.  I will walk through the core business today, provide my thoughts on the Sprint Wireline acquisition, and give details on capital allocation and valuation expectations. 

Core Business

Cogent's unique network strategy enables it to leverage per-unit cost curves that decline substantially faster than its competitors.  Its global, 100% fiber network runs Ethernet-only protocols on a collection of single pairs of dark fiber procured from over 300 global fiber providers.  Its single network design allows it to operate much more efficiently than other heterogeneous networks while also allowing Cogent to more directly benefit from rapid declines in cost per mbps in optical transport and routing, which have declined on -80% and -40% CAGRs, respectively, which will continue into the future.  Cogent architected its network in this way believing that the internet would become the dominant network with all future applications (voice, video, etc.) eventually flowing through data pipes, rendering the pipe a commodity service that must be operated at the lowest cost per unit possible.  In 2022 it is generally accepted that OTT applications are superior, but Cogent was considered a maverick for its views when it was founded in 1999.  Armed with the lowest production costs in its end markets, Cogent prices aggressively by offering the best price/value everywhere its network competes.

Cogent reports the business in two core segments: On Net and Off Net.   On Net revenues are derived from services provisioned on Cogent’s owned and operated assets.  Off Net revenues are derived from services which are provisioned via a wholesale connection.  Cogent only sells Off Net services bundled with On Net services.

Cogent also segments its business by customer type, described as Net Centric and Corporate.  Net Centric customers buy wholesale network services from Cogent within carrier-neutral data centers, while Corporate customers buy retail internet and VPN services within multi-tenant office buildings.  I will describe the current business by customer segmentation below.  

Net Centric

Cogent’s Net Centric segment today consists of its wholesale IP transit business.  Its transit network carries roughly 25% of global internet traffic and runs at around 30% peak network utilization.  Cogent’s conducts its Net Centric business from over 1,400 carrier-neutral data centers (CNDCs) around the world.  Today, the Net Centric segment sells IP transit services to nearly 8,000 bandwidth-intensive content and network companies globally.  While FAANG companies are large customers, it has no material customer concentration, with the top 25 customers representing about 6% of revenue.  It has the largest dedicated sales force in the IP Transit business, with its chief competitors (Lumen, Telia, and NTT) generally de-prioritizing the service in their product portfolios.  The IP Transit market is stable at about $1.5b in revenue and Cogent has about 17% revenue share (from 25% volume share).  All revenue growth comes from competitive share gains. 

Cogent’s motto is "Smart People Buy Dump Pipes" and its go-to-market and pricing strategies are oriented around aggressive discounting per mbps to gain volume and revenue share in the stable transit market.  All revenue growth comes at the expense of other competitors.  With the lowest-cost and broadest global IP Transit offering, Cogent utilizes a standing offer in the market to all customers: Cogent will undercut competitors’ cost per GB by 50%.  

Today, over 70% of Cogent’s traffic flows from customer-to-customer, i.e. it gets paid by both the sender and receiver of packets.  This ratio has increased from 50% 3-4 years ago, when traffic growth was dominated by US-based consumption.  There is a handful of network companies (tier 1 networks) that exchange traffic settlement-free, most of which are in the US.  As such, Cogent disproportionately benefits from the globalization of over-the-top media and application consumption, such as streaming video, SaaS, AR/VR, and more. 

While new global content and network companies are formed every year, Cogent’s Net Centric customer set is relatively well-defined.  Its revenue growth in IP Transit is a function of traffic volume and pricing per GB.  Customers receive discounts on price/unit if they commit to higher volumes and/or longer contract terms.  As such, customers like Netflix or Amazon pay significantly lower prices per GB than a country-specific content or telco company.  Again, this creates non-linear benefits to Cogent as its international traffic accelerates: Cogent is able to generate more paid traffic growth by monetizing both sides of a route, and it gets paid higher prices per GB when traffic is delivered to/from smaller customers. 

With the closing of the Sprint Wireline acquisition, Cogent will expand its Net Centric services into two new end markets: optical wavelengths and dark fiber.  These expansions make available several billion dollars of new addressable market.  I will discuss these in more detail in the Sprint Wireline Acquisition section below. 

Corporate

Cogent's Corporate business offers industry-leading service levels, as measured by broadband speeds and installation times, at the same or better cost vs. the other telecom providers in the building.  While prices differ across markets, generally Cogent offers 1 gbps dedicated internet access (DIA) for $700/month and 10 gbps for $1,000/month, which compares to incumbents like AT&T and Verizon offering 1 gbps for ~$1,500-$2,000/month. 

Because of its price/value leadership, Cogent wins >40% of the written proposals it submits and tends to win with customers that prefer to use applications that are unbundled from the network (for voice, video, security, etc.).  It has roughly 14% penetration of customers in its "on net" locations (roughly 13,000 unique customers out of >93,000 tenants in its buildings), with plenty of share gain opportunities within its footprint.  Additionally, Cogent sells Off Net Corporate services in buildings outside of its 1,800 multi-tenant office building (MTOB) footprint to some of its On Net Corporate customers.  Off Net connections are procured on a wholesale basis from local network operators and are marked up by 100% by Cogent.

Cogent’s Corporate business has suffered through the most disruptive period in its corporate history since Covid-affected period began in early 2020.  Corporate tenants groomed their office footprints during the era of remote work and now hybrid working arrangements with staff, but there are early signs of stabilization and recovery.  Quarterly Corporate On Net revenue has declined from a prior peak of about $60m to about $50m/quarter, a decline of -17%.  The absolute decline has been bad, but it is even worse when compared to its normalized growth rate of 12-13%.  In that time period, quarterly revenue should have growth to about $75m/quarter.  The gap between realized performance and normalized performance is extremely wide at $25m/quarter.  This has materially reduced the EBITDA and FCF generation of the business relative to prior trendlines.   While it is hard to know the recovery curve certainty or precision, it does appear that the worst is behind us. 

Through 2022, we have begun to see stabilization of revenues for Cogent’s Corporate On Net business.  Unique customers have begun to (barely) grow again in Q3.  Central business district vacancies remain at elevated levels and the future for office workers remains uncertain.  On a sequential basis, revenues have begun to stabilize. Based on data providers like Kastle Systems and other sources, we can see stability and moderately increasing utilization of commercial real estate.  Rents in A-class commercial real estate may need to be adjusted downward to raise occupancy levels, but will impact landlords, not Cogent.  

Summarizing the Core Business

Cogent’s On Net services today consist of Net Centric and Corporate On Net and comprise roughly 76% of expected 2022 revenues. Importantly, Cogent’s incremental margins are very high for On Net services, generally ~100% at the gross margin level and >90% at the EBITDA margin level, all else equal.  Off Net Corporate revenues have 50% gross contribution margins and 45% incremental EBITDA margins. 

Net Centric has been growing above trendline in the mid-teens on an FX-neutral basis.  Corporate has been growing well below trendline, as discussed above.  However, the secular trends behind both remain solid because Cogent offers the best price/value network to support OTT consumer and business applications.  While I hope for a rapid reversion to Cogent’s normalized trendline in its Corporate business, we don’t need that to support the current path of FCF and dividend growth or to benefit from the integration of the Sprint Wireline assets which provide a more idiosyncratic path to greater FCF generation. 

As I will discuss below, the Sprint Wireline acquisition introduces a fundamental discontinuity into the business which creates a massively asymmetric opportunity in the stock today.

CATALYST - Sprint Wireline Acquisition

T-Mobile’s acquisition of Sprint was game-changing in many ways.  I studied it in detail as a former owner of Sprint and current owner of T-Mobile.  The prize for that deal was twofold: (1) Sprint’s significant advantage in 5G spectrum which, combined with T-Mobile’s assets, will produce 14x more network capacity than standalone T-Mobile by 2025; and (2) extensive cost synergies over $7.5b annually.  One aspect not given much consideration was Sprint’s wireline business, the topic of this discussion.  T-Mobile recently migrated all data traffic off of Sprint’s wireless and wireline assets onto the core T-Mobile network, enabling T-Mobile to exit the non-core Sprint Wireline business without any disruption to its core wireless business.  Sprint Wireline can be better utilized and restructured more rapidly in others’ hands (especially Cogent’s) because T-Mobile must be very judicious regarding layoffs, employee relations, and customer service due to heavy regulatory scrutiny from the Sprint merger process. 

The Sprint wireline business has roots from 100 years ago and it was the first to build a nationwide fiber backbone.  MCI attempted to buy this business in 2002 for $129 billion, but it was blocked by the DOJ.  Over time, the business has been de-prioritized, restructured, and reorganized multiple times, consistently ceding priority to growing wireless businesses and suffering through revenue declines as the internet became the dominant and lowest-cost network for most services and applications. 

Sprint Wireline’s network has over 19,000 route miles of fiber, built along unique right-of-way (railroad lines) and optimal for the best DWDM technology available on the market today.  Similar to its past acquisitions, Cogent is uniquely organized and positioned to combine its network with Sprint’s and restructure it into a profitable business with attractive growth opportunities.  

Cogent will acquire the Sprint Wireline business from T-Mobile for $1 (one dollar), with the acquisition set to close in 2H 2023.  Currently the business is money-losing and T-Mobile is committing nearly $1.5b to offload this business to Cogent, including $700m of cash payments to Cogent in exchange for a take-or-pay IP transit contract.  T-Mobile has stated that it does not intend to use the transit services, so in effect this is simply a vehicle for T-Mobile to pay Cogent $700m to take Sprint Wireline off its hands.  I believe T-Mobile sees this as a way to offload a -$300m FCF line of business at a >20% return on capital. 

T-Mobile is contractually obligated to exit specific business lines that Cogent does not want to support.  As part of that process, T-Mobile will also wind down certain parts of the internal organization that were supporting those legacy revenues.  At closing, Cogent expects this business to generate $450m of “clean” revenue (that Cogent will support into the future) and $630m of cash costs, or -$180m of EBITDA.  While very negative on the surface, Cogent can extract cost synergies rapidly to turn the business EBITDA positive relatively quickly.  Furthermore, the acquisition will open two new end markets that provide significant revenue synergy opportunities.  Below I will discuss the cost synergies and revenue synergies, before synthesizing them into the combined view. 

Cost Synergies

Cogent is inheriting a $630m cash cost structure, but there are significant, clearly identifiable network synergies that will make the business profitable within two years (or likely sooner).  Additionally, Cogent intends to retain about 700 of the existing 1,300 employees at Sprint Wireline, offering additional personnel-related cost synergies. 

Cogent will spend about $50m of capex to consolidate all of Sprint’s traffic onto the Cogent network and to physically combine the networks which will unlock significant cost and revenue synergies.  Some of this spending has begun already.  After this work is complete, Cogent will save Sprint Wireline an estimated $205m of annual savings by moving all of Sprint’s traffic domestically and internationally onto Cogent’s network.  Furthermore, combining the networks will allow Cogent to terminate one of its largest dark fiber IRU leases with Lumen, for which it pays $15-20m of annual maintenance.  In total, Cogent expects to realize $220m of annualized network cost synergies within 3 years of closing the deal.  Additional savings will be achieved through headcount adjustments post closing, with total annual synergies likely surpassing $250m. 

A business generating $450m of “clean” revenue will become EBITDA positive by year 3, but likely much sooner since Cogent is working on connecting the networks ahead of deal closure.  Importantly, Cogent expects strong retention of that $450m of revenue, which is primarily serviced through direct internet access (DIA) and VPN services.  Once the transaction closes, Cogent intends to migrate all customer traffic to its network and give customers 10x the service level for the same price, i.e. 100 mbps will move to 1 gbps at the same price.  It expects the base business to grow in the low single-digit range annually, before considering revenue synergies. 

Cogent negotiated the acquisition to receive $350m of monthly payments ($29m/mo) over the first 12 months post-closing, and another $350m paid monthly ($8.3m/mo) over the following 3.5 years.  It was structured this way specifically so that Cogent would always have more cash at the end of each month vs. its standalone business, i.e. we can infer that the major restructuring efforts are expected to be completed within the first 12 months.  

Revenue Synergies

Cogent is inheriting a $450m go-forward business with revenue streams segmented as follows:

1.       Dedicated internet access (DIA) and IP Transit - $220m

2.       VPN Services – about $220m

3.       Optical wavelengths – about $8m

4.       Colocation – about $1m

Cogent’s core business addresses #1 and #2 between its Corporate segment (DIA and VPN services) and its net centric business (IP Transit).  Sprint’s customer base tends to be larger enterprises, whereas Cogent’s Corporate segment tends to sell to SMBs.  Besides the cost synergies, the most interesting aspect of this deal are the potential revenue synergies in #3 above (optical wavelengths) and in a new segment, dark fiber.  A more detailed discussion on these two new markets follows.

Optical Wavelengths

It is easiest to think about wavelengths as dedicated, point-to-point data connections, running on customer-specific, dedicated spectrum frequencies (e.g. a dedicated, specific shade of blue in the visual spectrum that is provisioned only for AWS).  Rather than having packets route through the internet on a best-efforts basis, customers with large bandwidth needs can have dedicated links that run completely independent of the internet, which enables higher service levels and bandwidth that is not oversubscribed and cannot be blocked by other competing traffic.  Wavelengths are considered a “lit” service because they are managed by the network provider, in this case Cogent/Sprint Wireline, and sold as a service to bandwidth-hungry customers. 

Cogent is entering this market with a negative cost basis on its assets since T-Mobile is paying them cash to acquire Sprint Wireline and because the cost synergies alone create high visibility to EBITDA and FCF positive operations on the inherited business.  Once the Sprint and Cogent networks are physically combined, Cogent will dedicate a pair of fiber to the Wavelength business and offer point-to-point services from its 800 carrier-neutral data centers (CNDCs) in North America, compared to Sprint’s 23 points of presence (POPs) today.  Once the network combination is complete, Cogent will have the ability to sell wavelength services in a much larger end market. 

The total possible number of links in a network is expressed as K = N(N-1)/2, where K is the total number of links and N is the number of network nodes.  By combining the networks, Cogent will expand Sprint’s addressable market from 253 sellable links to 319,600 links.  It is a >100x TAM expansion and the Wavelength product is sold to many of the same customers that buy IP Transit from Cogent, opening cross-sell opportunities for the existing Net Centric sales force. 

Because Cogent will offer Wavelength services for links between its CNDCs in North America, the most likely addressable customers are the hyperscale tech companies, especially cloud computing providers like AWS, Azure, Google Cloud, Oracle, and others.  In doing some cross-diligence between Cogent and Amazon on this research thread I’ve been fascinated to learn about the proprietary fiber “fabric” that AWS has assembled to build significant bandwidth capacity, route diversity, and redundancy.  AWS uses primarily 100G links between its POPs for data replication and to create diverse alternate paths with no service failures in the case of local or regional outages.  Amazon has 410 POPs globally and over 125 (and counting) in North America, suggesting there are about 8,000 unique links connecting all its facilities.  Below is a chart from AWS Re:Invent 2018 which shows a conceptualization of their network fabric.

I estimate that Azure has over 5,000 unique links in North America as well.  Of course, sophisticated and hyperscale customers like Alphabet, Meta, Netflix, Disney, IBM, Oracle and many others populate CNDCs and have data replication needs as well. 

I suspect that Cogent will address this market by replicating its go-to-market strategy in the Corporate segment, i.e. offering a much better service at current market prices.  From my conversations with sellers of wavelength services, currently 100G wavelengths are offered in the $2,200-3,000/month range (dependent on locations and route miles) and 400G wavelengths are $6,000-6,500/month.  Cogent will enter the market with the latest Ciena optical equipment that will be capable of 800G on 160 unique channels, and no legacy revenues to cannibalize.  This means its roughly 320k unique links will have 51.2 million unique wavelengths available for sale. 

For now, I model that Cogent will offer 800G wavelengths for $6,000 of MRR, faster provisioning, and greater agility to meet customers’ needs – similar to its Corporate business. 

According to third-party research, the wavelength market in North America is about $2b of annual revenue and grows in the mid- to high-single-digits annually.  Contracts are between 1 and 5 years, with 3 years being the most common length.  The majority of the industry’s revenue resides within Lumen and Zayo, with a long tail of other fiber providers also selling wavelength services.  I believe there is close to $1b of revenue opportunity “up for grabs” every year based on contract terms, market size, and market growth.  Cogent’s superior price/value offering, large existing Net Centric sales force, and pre-existing relationships with Net Centric customers will allow it to compete immediately and aggressively once the network combination work is complete.  I believe it is possible to pencil out over $350m of new revenue from these efforts by 2028, five years after closing the acquisition.  See the chart below for more detailed analysis:

I believe the scenario discussed above represents a reasonable “base case” scenario based on my conversations with Cogent and wavelength market participants since this deal was announced.  Alternate scenarios would likely involve a lower win share due to market inertia, but 3-year contract terms make available a sizable portion of market revenues each year. 

Cogent has about 200 net centric salespeople, the largest and most experienced dedicated sales force selling bulk bandwidth to large networks and content companies globally.  At this point, all of Cogent’s major US-based Net Centric customers know this deal is occurring and what Cogent plans to do in the wavelength market.  I believe Cogent will be able to build a strong pipeline of new business even before the deal closes and before the networks are combined, and companies can plan their migrations to the faster/better/cheaper Cogent wavelengths in 2024 and beyond. 

Importantly, wavelength services will be offered entirely “on net,” meaning Wavelength revenues come with 95% incremental margins.  However, they do require about $30m of annual capex and would require more at higher revenue levels to maintain the network at agreed-upon SLAs. 

Dark Fiber

Dark Fiber is physical fiber that is leased to another entity under an Indefeasible Right of Use (IRU) agreement.  Dark Fiber customers have full access to the physical fiber strands and can use them to their heart’s desire, provided they light the fiber with their own optical equipment.  Dark Fiber contracts tend to be long-term wholesale agreements with ISPs, universities, hyperscale tech companies, and other long-duration, bandwidth-hungry entities that have the technological knowhow and want the lowest cost for specific routes.  As a buyer of dark fiber, Cogent knows this market well. 

Cogent will have owned-and-operated physical fiber after this deal closes.  The Sprint network has an average of about 48 pairs of fiber along its routes, one of which will be used for Core Cogent and one of which will be dedicated to the Wavelengths business.  Perhaps Cogent will retain a few for future capacity as well.  This means Cogent should have an average of 40+ pairs of fiber that it could sell into the dark fiber market. 

It is difficult to know how to size this opportunity for Cogent, but one reference point is the Lumen IRU mentioned above in the cost synergy section.  Cogent pays $15-20m of annual maintenance fees to Lumen for rights to 12,500 route-miles of a single pair of fiber.  Cogent is acquiring 19,000 route-miles of physical network from Sprint.  Perhaps we could size this opportunity by scaling it to the size of Sprint’s network and multiplying by the number of strands Cogent could sell. 

Some back-of-the-envelope math would suggest an equivalent of about $30m/year per pair of fiber, multiplied by an average of 40 available strands to sell.  Therefore, this could be a revenue opportunity of $1.2b of annual revenue.  However, because Cogent will likely take an aggressive pricing strategy to this segment, I assume the opportunity is much smaller than that, perhaps as much as $400m.  In my modeling period, I expect Cogent to reach 10% of that ($40m) by 2028 given how episodic these deals can be, with very long contract terms reducing the annual “jump ball” opportunities. 

Pro Forma Sprint Wireline

Now that we’ve gone through the cost and revenue synergies, let’s synthesize what we know about Sprint Wireline.  My estimate of standalone FCF for Cogent in 2028 is $230m.  When we add Sprint Wireline’s contributions, including all the cost and revenue synergies discussed above, it is over 100% accretive to free cash flow, generating an estimated $280m of additional FCF in 2028.  On a combined basis, I believe the company has a path to generate >$10/share of FCF by that time.

The cumulative cash flow from Sprint Wireline through 2028 would be roughly $1.3b, over 50% of the current market cap.  At a 15% discount rate, the NPV of these additional cash flows would be $750m, or nearly $16/share in today’s terms.  The stock is up about 7% (<$4) since the deal was announced, indicating a healthy dose of skepticism and/or confusion around the accretion from this acquisition. 

We are many years from this outcome, but I believe the downside case would still be very accretive to Cogent’s shareholders vs. standalone.  It has knowable and gettable cost synergies.  Perhaps the new revenue opportunities would develop more slowly, but in any reasonable case there will be more operating FCF and certainly more net cash on the balance sheet by the time the T-Mobile payments stop. 

Below is a chart enumerating the revenue and cost synergies, by line item, that I’ve discussed below.

Capital Allocation and Valuation

Dave Schaeffer, Cogent’s founder and CEO, is one of the most owner-oriented CEOs I have encountered in my career.  He is parsimonious and judicious with capital and his views on capital allocation echo strongly with some of the best in history.  I believe his philosophy lies somewhere between John Malone and Henry Singleton. 

Cogent’s “normalized” value creation algorithm (excluding Sprint Wireline) looks like this:

• 8-10% revenue growth

• 200 bps annual margin expansion = mid-teens EBITDA growth

• Flat/declining capital intensity = >20% FCF growth

Cogent utilizes its balance sheet similar to a John Malone company, whereby it utilizes its EBITDA growth to increase borrowing capacity and return additional capital to shareholders.  However, the transmission channels of capital returns depend on the state of markets and of the tax efficiency at the time.  Today, the primary medium is through regular dividends, with Cogent paying out >100% of FCF in dividends as it gradually distributes excess cash.  In past environments, Cogent has returned capital via combinations of buybacks ($1.2b cumulative repurchases) and special dividends.  It has a particular affinity for dividends because it has been able to classify a large percentage of them as a return of capital, thereby lowering investors’ cost bases. 

With the addition of Sprint Wireline, the company should benefit from significant FCF accretion and acceleration vs. standalone Cogent.  While net leverage stands at close to 4x today, above its target range, it has a clear path to deleveraging in the future with significant EBITDA expansion and FCF generation.  There will be significant future balance sheet capacity generated by the cost and revenue synergies, creating future optionality around additional capital returns.

I believe the company has a path to >$10 of FCF in 2028.  I use 2028 because that is the first “clean” year that will not have any deal-related cash payments coming from T-Mobile.  At that level of FCF, Cogent would likely distribute >$12/share in dividends.  If we value Cogent’s dividend yield at +200 bps vs. the 10-year treasury (its historical median spread), the stock would trade north of $200/share in 2028 and would be worth roughly $105 discounted back 15% per year for 5 years. See below for Cogent’s historical trading spreads since it instituted its dividend.

Historically, Cogent has traded at 15-20x EBITDA.  Applying 15x my 2028 estimate of $900m, less 3x of net debt = roughly $11b of equity value.  With 50m shares outstanding (excluding future buybacks), Cogent would be worth $220/share. 

Conclusion

Cogent is attractive on a standalone basis as the lowest-cost producer of connectivity in its end markets.  The reacceleration of Corporate growth alone would result in an attractive investment.  However, its acquisition of Sprint Wireline creates an idiosyncratic discontinuity in FCF generation that is well above and beyond what the core business will achieve.  With a disciplined and owner-oriented capital allocator making decisions at the group level, Cogent has significant pathways to create material excess return for owners at under $57/share.  

Catalyst

Cogent's Sprint Wireline acquisition will be >75% accretive to standalone EBITDA and >100% accretive to standalone FCF on an operational and run-rate basis by 2028, when the $700m of cash payments from T-Mobile will cease.  With over $10 of future FCF/share and dividends likely >$12/share by then, the stock offers compelling risk/reward ahead of deal closure and the realization of synergies.