Fed up with what it said were sluggish negotiations, Sprint network affiliate Alamosa Holdings Inc. took its bid to merge with fellow affiliate AirGate PCS Inc. public in order to score the approval of AirGate’s investors. Wall Street appeared to cheer the move, sending Alamosa’s stock up around 8 percent to $11.65 per share and AirGate’s stock up almost 23 percent to $33.90 per share. Both companies’ stock prices leveled off after the news.
Alamosa said it has been pursuing a merger with AirGate since the middle of this year. Under the stock-for-stock deal, AirGate investors would receive 2.8 Alamosa shares in exchange for their AirGate shares. The deal would be worth around $350 million.
Following its announcement, Alamosa held a conference call for investors to explain the benefits of the combination. The carrier even released a copy of the letter it said it sent AirGate detailing the merger.
“When we sent this letter to AirGate four weeks ago, we considered releasing it publicly so that AirGate shareholders would have this important information about their company,” said David Sharbutt, Alamosa’s chairman and chief executive officer. “However, AirGate requested that we first give them an opportunity to consider and respond to our proposal. We decided to release the details of our proposal now because we believe that AirGate is not giving serious consideration to our offer.”
In a statement released shortly after Alamosa’s announcement, AirGate chief Thomas Dougherty said the carrier was still considering the proposal.
“We are hereby advising shareholders that in our continuing effort to maximize shareholder value, our board of directors is giving this proposal serious consideration, as we do with any matter of this nature,” said Dougherty, the carrier’s president and CEO. “The company has retained a financial advisor, and we are carefully reviewing our strategic alternatives, including continued execution of our recently developed long-term strategic plan, as well as consideration of business combinations such as the proposed combination, to determine what course of action is in the best interest of AirGate and our shareholders in building shareholder value.”
AirGate said it had retained Banc of America Securities L.L.C. to advise it on the merger proposal.
A combined Alamosa and AirGate would create a Sprint PCS affiliate with more than 23 million total pops, more than 18 million covered pops and more than 1.25 million subscribers. Alamosa said its proposal is set to expire Dec. 6.
Sprint’s affiliates have suffered under tight financial situations during the past several years. Indeed, affiliate Horizon PCS Inc. and AirGate subsidiary iPCS were forced into bankruptcy. However, many of Sprint’s affiliates have managed to renegotiate their contracts with Sprint, and have recently enjoyed solid earnings and stock prices.
Indeed, Raymond James rated Alamosa’s stock as an “outperform” before the carrier announced its intention to merge with AirGate. After the announcement, however, Raymond James downgraded AirGate to “market perform” because of what the firm said was the risk associated with the deal. Raymond James makes a market in both AirGate and Alamosa stocks. RCR
