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Goldman Sachs, TPG seal Alltel buyout

Goldman Sachs Group Inc and TPG Inc have agreed to acquire Alltel Corp for US$27.5 billion including debt in the largest buyout of a telecommunications company.

Investors will receive US$71.50 a share, the mobile-phone company said in a statement on Sunday. The offer is 9.6 percent more than Little Rock, Arkansas-based Alltel's closing share price on Friday and exceeds the US$70 a share expected by Michael Nelson, an analyst at Stanford Group Co.

TPG and Goldman Sachs will gain control of the fifth-biggest US wireless company and the country's largest geographic network. The purchase tops the takeover of Denmark's TDC A/S by a group including Kohlberg Kravis Roberts and Co and Blackstone Group LP for US$15.3 billion including debt in January last year.

Alltel chief executive officer Scott Ford, who will remain in his current role, announced in February that the company would explore a "broad spectrum of options" to increase shareholder value.

Shares of Alltel fell US$0.14 to US$65.21 on the New York Stock Exchange on Friday. 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.

In addition to TPG and the Goldman Sachs Capital Partners (GSCP) buyout unit, 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.

"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," Ford said in the statement.

Low debt levels and high cash flow made Alltel an attractive target for private equity investors, said Stanford Group's Nelson before the announcement.

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 US$79 a share from another phone company.

The company, founded in 1943, began offering wireless services 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 percent last quarter to US$2.08 billion.

The company's "My Circle" program, which lets customers make unlimited calls to five other phone numbers, helped fuel growth.

Merrill Lynch and 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.
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