Release date: Dec. 9, 2005
LITTLE ROCK, Ark. - Alltel today announced that it will spin off its wireline business and merge it with VALOR Communications Group Inc. in a transaction valued at about $9.1 billion, based on VALOR's closing stock price as of Dec. 8. The combination creates a major wireline competitor focused on the rural U.S. The transaction will be a tax-free separation of Alltel's wireline business and will reposition the remaining Alltel as a pure-play wireless service provider with roughly 11 million customers in 34 states.
The spin-off and merger with VALOR will create a new wireline company located in Central Arkansas, with Alltel shareholders owning 85 percent of the combined entity. VALOR Communications, based in Irving, Texas, will issue approximately 400 million shares of stock to the shareholders of Alltel in exchange for the Alltel wireline business. Current Alltel shareholders will continue to own 1 share of the remaining wireless entity and will receive 1.05 shares of VALOR stock for each share of Alltel they currently own.
In addition, VALOR Communications will assume approximately $4.2 billion in additional debt. The $9.1 billion transaction will be tax-free to Alltel, VALOR and each company's shareholders. With $5.4 billion in total net debt, the new merged company will be levered at approximately 3.2 times net debt to operating income before depreciation and amortization, substantially lower than VALOR's current leverage ratio of approximately 4 times debt to operating income before depreciation and amortization.
Alltel's and VALOR's wireline businesses have complementary geographic footprints with favorable rural characteristics, and their integration will benefit from Alltel's existing billing system outsourcing relationship with VALOR.
"This transaction creates new growth opportunities for both the wireless and wireline businesses as separate entities," said Scott Ford, Alltel president and chief executive officer. "Each business will have sufficient scale to compete on its own and will be appropriately capitalized to take advantage of strategic, operational and financial opportunities."
Management teams drawn from Alltel will lead the wireless and wireline businesses. "Both businesses will gain skilled management teams with a great breadth of experience in the communications industry, with the wireline business adding senior leadership from VALOR's current team," Ford said.
Francis X. "Skip" Frantz, currently executive vice president and secretary of Alltel who has been with Alltel for more than 15 years, will become chairman of the board of the combined wireline company. Jeffery Gardner, currently executive vice president and chief financial officer of Alltel, will become president and chief executive officer of the new company. He has been with Alltel since 1998 and has been in the industry since 1986.
"VALOR is a very good fit with the Alltel wireline business and the combined companies will add value for our shareholders and provide quality service for our customers," Gardner said. "I look forward to working with my colleagues at VALOR to run our new company."
Following are the highlights for the combined wireline business:
The wireline business will have nine total board members, including Frantz and Gardner, each serving a staggered three-year term. Dennis Foster, currently a member of Alltel's board, will join the board of the new wireline company as lead director. Alltel will name five other directors, and one director will be named by VALOR Communications. The company initially will locate its headquarters in facilities currently owned by Alltel and will seek a permanent location.
The wireline leadership team also will include:
The transaction is expected to close by mid-2006 and requires approval from VALOR shareholders, federal and state regulators and a letter ruling from the Internal Revenue Service approving the tax-free status.
The separation of the wireless and wireline businesses is part of Alltel's strategic push to grow its domestic wireless business. During the year, Alltel has purchased Western Wireless, certain assets of Cingular and Public Service Cellular. The company also has agreed to acquire Midwest Wireless.
Here are the highlights for the wireless business:
In the wireless business, Ford will continue in his current role as will Kevin Beebe, group president of operations; Jeff Fox, group president of shared services; and John Ebner, treasurer.
Sharilyn Gasaway, currently controller for Alltel, will become executive vice president and chief financial officer. Gasaway has been with Alltel since 1999 and has served in various management roles in accounting and finance.
Tony Thomas, currently vice president of wireless wholesale operations, will become vice president of investor relations.
Additionally, Alltel today announced it has signed an agreement to sell the Haitian and Bolivian wireless operations it acquired from Western Wireless earlier this year for an undisclosed cash price. The transaction, subject to regulatory and other approvals, is expected to close by mid-2006.
J.P. Morgan Securities Inc., Merrill Lynch & Co. and Stephens Inc. acted as financial advisers to Alltel. Skadden, Arps, Slate, Meagher & Flom LLP served as counsel to Alltel.
Investor Call and Webcast
A conference call and Webcast will be held today at 8 a.m. CST. To take part in the conference call, dial 866-831-6162 and enter the pass code 74875056. The Webcast may be accessed at www.alltel.com/investors.
Media Call and Webcast
A conference call for media will be held today at 11 a.m. CST. To take part in the conference call, dial 866-383-8119 and enter the pass code 48612524. The Webcast may be accessed at www.alltel.com/news.
Alltel is a customer-focused communications company with more than 15 million customers in 36 states and nearly $10 billion in annual revenues.
Alltel is a customer-focused communications company with more than 15 million
customers in 36 states and nearly $10 billion in annual revenues.
Alltel claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events and results. Actual future events and results may differ materially from those expressed in these forward-looking statements as a result of a number of important factors. Representative examples of these factors include (without limitation) adverse changes in economic conditions in the markets served by Alltel; the extent, timing, and overall effects of competition in the communications business; material changes in the communications industry generally that could adversely affect vendor relationships with equipment and network suppliers and customer relationships with wholesale customers; changes in communications technology; the risks associated with pending acquisitions and dispositions, including the pending acquisition of the Idaho markets and Midwest Wireless and the pending dispositions of Western Wireless' Kansas and Nebraska markets, the Austrian, Bolivian and Haitian operations, and the wireline business; the risks associated with the integration of acquired businesses, including the integration of Western Wireless; the uncertainties related to any discussions or negotiations regarding the sale of any of the international assets; adverse changes in the terms and conditions of the wireless roaming agreements of Alltel; the potential for adverse changes in the ratings given to Alltel's debt securities by nationally accredited ratings organizations; the availability and cost of financing in the corporate credit and debt markets necessary to consummate the disposition of the wireline business; the uncertainties related to Alltel’s strategic investments; the effects of litigation; and the effects of federal and state legislation, rules, and regulations governing the communications industry. In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes.
Non-GAAP Financial Measures
This news release includes certain non-GAAP financial measures. A reconciliation of each such measure to the most directly comparable GAAP measure is below.
For additional information contact:
Andrew Moreau 501-905-7962
Vice President - Corporate Communications
Rob Clancy 501-905-8991
Vice President - Investor Relations
Alltel, NYSE: AT