The $71.50 a cash bid is 9.6% up on Alltel’s closing price Friday and 23% up on the level in December when reports first began circulating that potential buyers were circulating the Little Rock, Arkansas-based company.
The bid of $24.7bn for the shares, plus the assumption of debt, is at the top end of the estimated scale and is the biggest in the sector since the Danish incumbent carrier TDC AS and bought by a private equity consortium for $15.3bn in January 2006.
However the buyers have an obvious exit strategy lined up. Alltel boosts revenue from its 12 million subscribers in 35 states with roaming revenue from the big cellular subscribers Verizon and AT&T. But it is Verizon, with which it shares CDMA technology, that could achieve substantial synergies from taking over Alltel in a US market that has already seen substantial consolidation.
It was not a faltering performance but a strong financial record that made Alltel an attractive target. It has been enjoying double-digit revenue growth and in the last financial year to December 31 it increased net income by 34% to $841.9bn on revenue 19.95% higher at $7.8bn.
It is therefore no surprise that CEO Scott Ford and the senior management team will keep their jobs. Ford said that TPG and GSCP were long-term investors who were willing to make the investments necessary to continue to grow the wireless business in all of its markets.
Alltel became the fifth largest mobile carrier when it paid $4.3bn for fellow rural carrier Western Wireless in January 2005. In December 2005 it spun out its fixed-line business and merged it with Valor Communications Group Inc in a deal worth $9.1bn, to form Windstream Corp. This has left it with a strong balance sheet, ideal for private equity groups who will load it with debt.
