Private equity to buy Alltel in $27.5B deal: TPG Capital and GS Capital Partners to purchase nation’s No. 5 carrier

Alltel Corp. announced Sunday that it agreed to be acquired by two private-equity firms in a $27.5 billion transaction.
The buyers are TPG Capital, the global buyout group of private-investment firm TPG (formerly Texas Pacific Group), and GS Capital Partners, the private-equity vehicle of The Goldman Sachs Group. They will pay $71.50 in cash per Alltel common share under terms of the transaction. The price stands as a 23% premium over the carrier’s share price as of December, when rumors first surfaced of a purchase of Alltel. The rumors subsequently drove the carrier’s share price up.
The transaction was the result of a strategic review of options by the company, and Alltel’s board of directors unanimously approved the merger agreement, the company said. In addition to $24.8 billion in cash, the two private-equity firms will take on $2.7 billion of Alltel’s debt.
Pending shareholder and regulatory approvals, the deal is expected to close by the fourth quarter of this year or the first quarter of 2008, according to Alltel. News of the deal sent Alltel’s shares soaring more than 7% in early trading on Wall Street.
The deal is notable as it comes ahead of the Federal Communications Commission’s 700 MHz spectrum auction, which likely will take place sometime this summer. According to the Wall Street Journal, TPG and GSCP are prepared to invest in the auction to bulk up Alltel’s spectrum position.
This is private equity’s biggest deal in the wireless space. However, private equity has been involved in wireless before; a private-equity consortium purchased chipmaker Freescale Semiconductor Inc. last year for $17.6 billion.
“TPG and GSCP are long-term investors who are willing to make the investments necessary to continue to grow our wireless business in all of our markets,” said Scott Ford, Alltel’s CEO, who will remain in that role.
Despite months of rumors of private equity’s interest in Alltel, some observers had questioned whether the deal would go through because Alltel-profitable and well-run-does not fit the typical target for private equity. Usually, private-equity firms look for poorly performing companies that they can buy, turn around and then sell for a profit.