Alltel: Market Conditions, Upcoming Spectrum Auction Prompted Deal

by Lance Turner  on Wednesday, Jun. 13, 2007 10:31 am  

Alltel Corp. of Little Rock on Wednesday filed a document with the Securities & Exchange Commission outlining its reasons for accepting a $27.5 billion buyout from two private equity firms and explaining the process leading to the deal.
The full filing is available here.
Alltel said "favorable market conditions" and the coming 700 MHz spectrum auction were factors in going ahead with a deal. The wireless firm also considered the Federal Communication Commission’s anti-collusion rules, which prohibit strategic discussions among auction participants, and how that might affect the timing of any deal.
In the filing, the wireless firm said other reasons for the deal with Texas Pacific Group and Goldman Sachs Capital Partner include:
  • The "relative interest and readiness" of Texas Capital-Goldman Sachs to reach an agreement.
  • The opinions of Alltel's advisers — JPMorgan, Merrill Lynch and Stephens Inc. — that the deal was fair to Alltel shareholders.
  • That money paid to Alltel shareholders would be all cash, and that the per-share price for each share — $71.50 — was a 22.6 percent premium over Alltel's per share price before word circulated that the company might sell.
    In explaining the background of the deal, Alltel noted that Texas Capital-Goldman Sachs once offered Alltel $71 per share for the company. Alltel said it told the groups that it would require a higher offer, after which the wireless firm said Texas Capital-Goldman Sachs responded with a "best and final” offer of $71.50 per share.
    Alltel said company directors and senior management discussed strategic options during a meeting in January. Those options included a recapitalization, acquisitions or a merger or sale of the company. The directors ultimately directed management to consider "initiating a process for receiving indications of interest from potentially interested acquirers, with a view to concluding such a process by late spring or early summer of 2007."

    Debt Deal
    Alltel agreed on May 20 to the $27.5 billion buyout by private equity firms TPG Partners and GS Capital Partners. The deal still will need shareholder and FCC regulatory approval — a process that could extend into early 2008. Also to be settled are at least three lawsuits that claim the deal is unfair to shareholders.
    The name of the parent company into which Alltel will be merged is Atlantis Holdings LLC, which is a Delaware limited liability company. Alltel will merge with Atlantis Merger Sub Inc., a wholly-owned subsidiary of Atlantis, and will continue as the surviving company.
    In the filing, Alltel said Atlantis has obtained debt financing from Citigroup Global Markets Inc., Barclays Bank PLC, Barclays Bank Capital Inc., Goldman Sachs Credit Partners L.P., the Royal Bank of Scotland PLC and RBS Securities Corp. The deal will be financed with a $15.5 billion bank loan and $7.7 billion in junk bonds.
    The bank loan includes a $14 billion term loan and a $1.5 billion revolver. The junk bonds include $4.7 billion in senior unsecured notes and $3 billion in senior unsecured pay-in-kind, or PIK, notes, the filing said.
    As previously reported, the deal comes with a $625 million termination fee that Alltel will have to pay TPG and GS should the board change its recommendation to shareholders about approving the deal. Terms of Texas Capital-Goldman Sachs' proposal allows Alltel's board to consider any "superior proposal" it might receive before the deal is completed.
    "... Under the terms of the merger agreement, Alltel would remain free to respond to any subsequent bid that was (or was likely to lead to) a superior proposal, including by further negotiating with and providing information to such a bidder, and to terminate the merger agreement in favor of such a superior proposal, subject to payment of a termination fee that was well within the range of customary practice and was not believed to be a substantial deterrent to receipt of a higher bid," Alltel said on page 24 of the filing.

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