Goldman, TPG agree to buy Alltel for $24.7 b

NEW YORK: Goldman Sachs Group Inc teamed up with TPG Inc to buy Alltel Corp for about $24.7 billion in the largest leveraged buyout of a telecommunications company.

Investors will get $71.50 a share, the mobile-phone company said in a statement on Sunday. The offer is 9.6% more than Little Rock, Arkansas-based Alltel’s closing share price on May 18 and exceeds the $70 a share expected by Michael Nelson, an analyst at Stanford Group Co. Including debt, the bid values Alltel at $27.5 billion.

TPG, formerly Texas Pacific Group, and Goldman Sachs’ buyout unit will gain control of the fifth-biggest US wireless company and the country’s largest geographic network. The deal tops the takeover of Denmark’s TDC A/S by a group including Kohlberg Kravis Roberts & Co and Blackstone Group LP for $15.3 billion including debt in January 2006.

The buyers “are willing to make the investments necessary to continue to grow our wireless business in all of our markets,” Alltel chief executive officer Scott Ford, who began the sale process in February, said in the statement. He will remain at Alltel in his current post.

Alltel shares were indicated to trade at the equivalent of $70.90 at 9:05 am in Germany, an 8.7% increase from the May 18 closing price on the New York Stock Exchange. The stock rose to its highest level in more than seven years earlier this month after the Wall Street Journal first reported that Alltel was in talks with groups of investors.

TPG, based in Fort Worth, Texas, is the buyout firm founded in 1992 by David Bonderman, James Coulter and Bill Price. Goldman Sachs Capital Partners is the buyout unit of New York-based Goldman Sachs, the world’s biggest securities firm by market value.

Other private-equity groups interested in Alltel included Blackstone together with Providence Equity Partners, and Carlyle Group together with Kohlberg Kravis Roberts, according to people with knowledge of the discussions.
Low debt levels and high cash flow made Alltel an attractive target for private equity investors, Stanford Group’s Nelson said before the announcement. TPG and Goldman are paying about 25 times Alltel’s forecast net income for 2007, according to data compiled by Bloomberg.

Alltel operates mainly in rural areas and carries calls for customers of AT&T Inc. and Verizon Wireless, the two biggest US mobile-phone companies, where they lack coverage.

That led some analysts to speculate they may also bid for Alltel. Nelson, who is based in New York, had estimated Alltel could get as much as $79 a share from another phone company. The company, founded in 1943, began offering wireless service in 1985 and last year spun off its remaining fixed-line phone business to create Windstream Corp.

While the loss of Windstream’s customers caused Alltel to report lower profit in the past three quarters, sales from the remaining business rose 13% last quarter to $2.08 billion. The company’s “My Circle” program, which lets customers make unlimited calls to five other phone numbers, helped fuel growth.

Private-equity firms have announced $392 billion of takeovers this year, including $13.9 billion in the telecommunications industry.

Merrill Lynch & Co, Stephens Inc and JP Morgan Securities Inc advised Alltel on the transaction, and Citigroup Inc and Goldman Sachs advised TPG and Goldman Sachs Capital Partners. Goldman, Citigroup Inc, Barclays Plc and Royal Bank of Scotland Group Plc will provide financing for the purchase.

TPG raised $15 billion last year and is a partner with KKR in the $44 billion acquisition of Texas power producer TXU Corp, the biggest-ever leveraged buyout. It has invested in about 75 companies, including Burger King Corp and Continental Airlines Inc.