WSJ: 3 Equity Groups Consider Purchase of Alltel Corp.

by Lance Turner  on Wednesday, May. 9, 2007 6:20 am  

Scott Ford, CEO of Alltel Corp. of Little Rock.

Three private equity groups have formed to attempt to buy Alltel Corp. of Little Rock, according to a story in The Wall Street Journal on Wednesday.
The full story, available to Wall Street Journal subscribers here, says the groups "each have begun a series of meetings with Alltel's management." The story cites "people familiar with the matter."
The groupings include Blackstone Group and Providence Equity Partners; TPG Capital LLC (formerly Texas Pacific Group), and the private-equity arm of Goldman Sachs Group Inc.; and Carlyle Group and Kohlberg Kravis Roberts & Co., the Journal said.
Alltel has acknowledged that it is exploring a range of strategic alternatives, including a sale, but it has not commented beyond that. On Tuesday, The Wall Street Journal's Deal Journal blog noted that chatter had grown about a possible Alltel sale. Analysts have said Alltel could fetch anywhere from $25 billion to $30 billion.
On Wednesday, the Journal story said Alltel executives were trying to figure out a way to better take advantage of the company's balance sheet:
"The phone company, which has a market capitalization of $22.4 billion, is trying to figure out ways to take better advantage of its balance sheet. The company carries about $2.7 billion of long-term debt, a low figure for a company that produces roughly the same amount in cash flow each year. By comparison, rival Sprint Nextel Corp. carries debt of nearly twice its annual cash flow," the Journal said.
The newspaper said Alltel "would appear to be an attractive candidate," but that its share price, up 7.8 percent this year, has given many possible buyers pause.
Investors and analysts have been buzzing about a possible Alltel buyout since December, when The Wall Street Journal first reported that equity firms were circling the company. At the company's fourth-quarter earnings call in February, CEO Scott Ford confirmed what many already suspected: the wireless phone company was exploring several strategic options, including a competitive or private equity buyout. The company has had little to say about its options beyond that.
Alltel's exploration comes less than a year after it completed the spinoff of its wireline operations into a new Little Rock-based public company, Windstream Corp. It merged its wireline business with Valor Communications in deal valued at $9.1 billion.
In addition to private equity groups, other possible buyout candidates include such Alltel competitors as Verizon and AT&T.
Alltel has close to 12 million customers in 35 states, with a high penetration rate in rural areas.



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