Alltel Accepts $27.5B Buyout Offer
Under the terms of the offer, TPG Capital, the buyout arm of TPG Inc. , and GS Capital Partners, the private equity division of Goldman Sachs & Co. , will acquire Alltel's outstanding common stock for $71.50 per share in cash, which would value the operator at $27.5 billion. The deal is expected to close in the fourth quarter of this year, once shareholder and regulatory approvals are granted.
"This transaction delivers substantial and certain value to our shareholders while providing the company with long-term partners who share our commitment to our customers, employees and the communities we serve," said Alltel chief executive Scott Ford in a press release.
Alltel notes that the purchase price per share is 23 percent higher than the share price before media reports first circulated about a possible merger or acquisition on December 29, 2006.
The Alltel deal certainly raises the bar on private equity buyouts. It is more than double the $12 billion that a consortium of private equity firms paid for Danish national operator TDC A/S (Copenhagen: TDC) in November 2005. (See TDC Unveils $12B Offer.)
"The general attractiveness of mobile [for private equity] is that cash generation is very strong and, in the case of the U.S., growing very nicely," says Robert Grindle, analyst at Dresdner Kleinwort . "As Alltel is a smaller player, the private equity exit route is likely to be by disposal when the bigger boys decide that the market is getting tougher and/or they have the money."
For full-year 2006, Alltel reported revenues of $7.9 billion and net income of $1.1 billion. Alltel's net cashflow from operations was $1.5 billion in 2006.
"This is a lovely sector for private equity... slash costs, sell assets, gear up those strong balance sheets," says Grindle.
In the first quarter of this year, Alltel reported net income of $225 million on revenues of $2 billion. That compares with $169 million in net income on $1.8 billion of revenues reported in the first quarter last year. Alltel has 12 million customers.
— Michelle Donegan, European Editor, Unstrung