Verizon Wireless signs $28.1-billion acquisition agreement for Alltel

06 June 2008

Verizon Wireless has announced that it has entered into an agreement with Alltel Corporation and Atlantis Holdings LLC, an affiliate of private investment firm TPG Capital and GS Capital Partners, to acquire Alltel Corporation in an all-cash merger.

A statement on Alltel's website confirms that Verizon Wireless will acquire the equity of Alltel for approximately $5.9 billion. Based on Alltel's projected net debt at closing of $22.2 billion, the aggregate value of the transaction is $28.1 billion.

The merger is subject to regulatory approvals, and is likely to be completed by the end of the year. Analysts say that the deal could face some regulatory hurdles, as the Federal Communications Commission (FCC) could require Alltel to divest some assets in areas where its business overlaps with Verizon.

Verizon has long been seen as a potential bidder for Alltel, and the two have held talks in the past, though speculation quieted down after Alltel was sold. Earlier attempts at the merger were foiled in part by Vodafone, which owns 45 per cent of Verizon Wireless, who did not want to see any dilution of its own equity in the US carrier.

Post the declaration of the merger, Vodafone stock fell a few pennies, as although the deal will greatly help Verizon Wireless, Vodafone is unlikely to see a monetary gain for some time.

Post merger, Verizon Wireless will have to use the money generated to pay off debt, which would delay the annual cash dividend that Vodafone received for its 45 per cent holding in Verizon Wireless.