Alltel agrees to be sold for $27.5bn

Alltel Corp., an American telecommunications company, has agreed to be sold to two private-equity firms, TPG Inc. (formerly known as Texas Pacific Group) and GS Capital Partners (a subsidiary of Goldman Sachs Group Inc.), for $27.5 billion, marking the largest private buyout ever in the telecommunications industry.

The Little Rock, Arkansas-based mobile-phone services provider said in a press release that it had signed an agreement to be acquired by private equity consortium that includes TPG Capital and GS Capital Partners, putting an end to months of speculation about the future of the company.

Alltel, which was built through a series of acquisitions of regional carriers, had announced in February this year that it was considering various options for its future, sending its shares up in anticipation that it might be sold.

Under the deal, the private equity consortium would pay $71.50 per share to acquire all of the outstanding common stock of Alltel. According to Alltel, the price represents a premium of about 10 percent over Alltel’s closing price of $65.21 on Friday (May 18), and 23 percent over its price on December, 29, when speculation about its possible buyout began to build.

“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,” Alltel Chief Executive Officer Scott Ford said in the statement. “This transaction also ensures our customers can continue to rely on Alltel to deliver high-quality service and leading edge products and services.”

The Alltel deal, which is yet subject to shareholder and regulatory approval, is expected to close during the fourth quarter of this year or the first three months of 2008, Alltel said. The buyout is also subject to "customary closing conditions," the company said in the press release.

The purchase gives TPG and GS Capital the largest geographic network in the United States.

Alltel is the largest regional mobile phone company in America, and the fifth largest mobile phone company overall, with 12 million subscribers in 35 states. The wireless group has 15,000 employees. Alltel mainly concentrates in rural areas, but has low-cost roaming agreements with the major national CDMA carriers, especially Verizon Wireless and Sprint-Nextel, in order to provide national service.

Last year in April, the wireless company launched a unique plan, dubbed "My Circle," a free and optional feature for customers that subscribe to National/Greater Freedom calling plans starting at $59.99 and sign up for online account access. This feature lets callers phone a limited number of people on any other landline or wireless carrier for free.

The company's low debts and high cash flow made it an attractive acquisition target for private equity, Stanford Group analyst Michael Nelson said before the announcement.

Ford will retain his current role after the acquisition, and no changes are planned in staffing, according to media reports. Ford said the company's headquarters would remain in Little Rock.

Alltel's income from its continuing operations in first quarter, increased 34 percent to $225.4 million, or 63 cents per share, from $168.6 million, or 43 cents per share, a year ago, while revenue jumped 13 percent to $2.08 billion from $1.84 billion, the company reported earlier this month.

TPG Capital is the global buyout group of TPG, a private investment firm founded by David Bonderman, James Coulter and William S. Price III in 1992. TPG has offices in Fort Worth, San Francisco, London and New York City, with more than $30 billion in assets under management.

GS Capital Partners makes private equity investments on behalf of Goldman Sachs and others. Through GSCP the Goldman Sachs Group Inc. conducts privately negotiated acquisitions. The firm invests in a range of industries in a variety of situations, including build ups, leveraged buyouts, recapitalizations, acquisitions, and expansions. GSCP has offices in New York, San Francisco, London, Hong Kong, and Tokyo.