Alltel CEO Reveals More Buyout Details, Others To Come Later

Little will change after publicly traded Alltel Corp. goes private, CEO Scott Ford said Monday, less than 24 hours after the company announced it agreed to be acquired by Texas Pacific Group Capital and Goldman Sachs Capital Partners in a $27.5 billion cash and debt deal.

Headquarters will remain in Little Rock, investments will continue to be made in the business, jobs will not be cut and senior management officials will stay, Ford said.

"I know it sounds trite, but I don't think you're going to see much change," Ford said. "I'm saying it not to allay your fears. If Verizon or AT&T had been there and paid more, we'd have sold it to them."

Whether the two wireless companies were interested in Alltel, Ford wouldn't say. He did not disclose who the other suitors were, but did say the company "made several rounds of management presentations to various equity groups" and that some were surprised a deal happened so quickly.

"I think the process that we used to try and herd people into the right kind of environment to take care of our shareholders helped deliver a superior price from what we would have otherwise gotten, and I think that will all be clear in the fullness of time, too," he said.

TPG Capital and GS Capital Partners agreed to pay $71.50 a share and assume Alltel's relatively low $2.7 billion debt. Debt from the transaction would be transferred to Alltel.

"Our shareholders weren't going to see $71.50 in my career path at the current course and speed we were going previously," Ford said.

The price is 10 percent more than Alltel's Friday closing price of $65.21. Alltel's stock (NYSE: AT) rose 6.7 percent Monday to $69.60.

Monday's stock performance appeared to indicate the market believes the deal will happen, Ford said, noting that if the stock price rises above the agreed price, it will not affect the deal.

The deal is not necessarily final, although Ford would not speak about a window of time the company had to seek or receive offers from other buyers. Details will be in a document to be filed with the federal Securities and Exchange Commission later this week, he said. He also would not say anything specific about termination fees.

"Every deal in America has a fiduciary out," he said. "If someone wants to come over the top, they're free to come over the top."

Analysts said the deal was solid and that it was unlikely Alltel would receive a higher bid from another prospective buyer.

"The valuation and leverage seem fair to full for the company and at this stage, an over-the-top bid seems relatively unlikely," Bank of America Securities analyst David Barden said in a note.

"We expect this deal to be successfully completed, given a long and comprehensive process undertaken by Alltel," Morgan Stanley analyst Simon Flannery said in a note to investors. "We think that potential strategic bidders are unlikely to get involved at these price levels."

Neither Barden nor Flannery receive direct or indirect compensation for expressing specific views, according to disclosures attached to each note. Both of their employers own 1 percent or more of a class of Alltel's common equity securities and expect to receive compensation for investment banking services from Alltel.

TPG Capital and GS Capital Partners want to invest in the wireless business, Ford said, noting that the company will still be able to make acquisitions and invest in its network.

Ford was quiet on any potential investment the company would make at the Federal Communications Commission auction of radio spectrum for wireless broadband communications.

Alltel's senior management will work out a deal with the new owners concerning money, Ford said.

According to the company's most recent proxy statement, Alltel's top five officials could make up to a combined $250 million from the company's sale.

For Alltel's other 15,000 or so employees, the deal does not get any better, Ford said.

"If you're a shareholder employee, you get paid, and you get to keep your job," he said, adding there are no forced reduction plans for employees.

TPG Capital and GS Capital Partners also agreed, as part of the contract, to make a goodwill offering to the employees, which Ford said he thought employees would be pleased with as details come out.

"As part of the contract, we got money for them as part of the transition," he said.

Whether or not the buyout was a good deal for the acquirers remains to be seen, according to Flannery.

"Alltel is strongly positioned with a good management team, but in order to get an attractive return on investment, a lot of things have to go right."

The overall economy must stay healthy and Alltel must continue to differentiate itself from its larger competitors, Flannery said.

"The exit will also be important. Can Alltel be sold at an attractive price to a strategic buyer in the next three to four years, or will the company reemerge as a public company?" Flannery said.
Source : http://www.nwaonline.net