While many of its second-tier cellular counterparts have been acquired during the last year in an increasingly consolidated industry, Greensboro, N.C.-based Vanguard Cellular Systems Inc. may continue to go it alone.
Speculation about potential financial and strategic buyers for Vanguard has abounded during the last few weeks, but many analysts say the chances are slim Vanguard will be acquired. One analyst said the chances of a transaction occurring are less than 50 percent.
Vanguard often has been the subject of consolidation speculation, even though company executives consistently have maintained the company is not looking for a partner.
Tabitha Zane, director of investor relations at Vanguard, said the company does not comment on rumors.
“Vanguard shares have risen 19 percent during the past two weeks (vs. a two percent decline in the S&P 500), concurrent with speculation that the company may be acquired and news reports that it has hired Wasserstein Perella to explore strategic alternatives,” said a July 28 Toronto Dominion report authored by analysts Brian Coleman and Jonathan Atkin. “While takeover speculation may have contributed strongly to the shares’ rise, we believe that strong underlying fundamentals as well as stock repurchase actions by management were contributing factors as well.”
Vanguard’s shares reached a 52-week high July 23 at $24.38. Shares were trading in the $23 range midday Friday.
If a transaction were to occur in the near term, a financial takeover would be more likely than a strategic transaction, say analysts.
“Although Vanguard’s footprint meshes well with that of other [Time Division Multiple Access] digital carriers, notably AT&T Wireless [Services Inc.], we believe that these carriers are more likely to view the company’s network as a means of expanding digital coverage for their own customers through roaming agreements rather than acquisition,” said the Toronto Dominion report. “Only over the long term, as TDMA deployment in primary markets nears completion, would we view a strategic acquisition of the company’s assets as plausible.”
The speculation may have been fueled by an announcement Vanguard made this spring that it planned to focus on its core Northeastern markets by selling off some of its assets in the South. It was thought the more compact footprint would make it easier for an acquiring company to fold Vanguard’s markets into its operation.
The company last week completed the sale of its Myrtle Beach, S.C., properties to Triton PCS Inc. for $160 million, and is awaiting the close of the sale of its 48-percent interest in the Wilmington-Jacksonville, N.C., market to United States Cellular Corp. The company in May signed a definitive agreement to sell its Pensacola and Fort Walton Beach, Fla., markets to Wireless One Network L.P. That transaction is expected to be completed in the fourth quarter.
Analysts say Vanguard will have to reduce overhead costs to bring it in line with its smaller operation. Vanguard’s Zane said the company is addressing that issue but has yet to release any details.
The company also this month closed its acquisition of NationPage, a regional paging provider with operations primarily in Pennsylvania and upstate New York. Vanguard, which offers paging both as part of a bundle as well as a stand-alone product, paid $28.5 million in cash for NationPage.
During the second quarter Vanguard added 25,000 net subscribers. Service revenues for the quarter totaled $101.4 million, a 15-percent increase from revenues of $88.3 million during the second quarter of last year.
Net income for the quarter equaled $63.8 million, or $1.72 per share, compared with net income of $74,000, or a break-even point per share, during the corresponding period a year ago. Net income was bolstered by a $117 million gain on the sale of the Myrtle Beach market.
