US rural mobile and fixed-line service provider Alltel Corp has achieved its ambition to become a wireless only company after agreeing to spin off its wireline business and merge it with Valor Communications Group Inc in a deal worth $9.1bn.
Under the terms of what is a reverse takeover, Alltel shareholders will receive 1.05 shares in Irving, Texas-based Valor giving them 85% of the combined company. Valor Communications will also assume approximately $4.2bn in additional debt.
Alltel’s and Valor’s wireline businesses have complementary geographic footprints and will have about 3.4 million customers in 16 states. The new company has targeted $40m annual synergies from the combination.
Little Rock, Arkansas-based Alltel is the fifth largest US mobile operator with 11 million customers in 34 states but saw the wireline business as a drag on its stock market value. Alltel plans an $3bn share repurchase program for the two years following the spin-off and the company also plans a $1bn debt-reduction program.
Alltel CEO Scott Ford said the transaction created new growth opportunities for both the wireless and wireline businesses. 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, he said.
Management teams drawn from Alltel will lead both the wireless and wireline businesses. Jeffery Gardner, currently executive vice president and CFO of Alltel, will become CEO of Valor.
Revenue of the combined wireline business would be $3.4bn in the year to September 30 and will have net debt of about $5.4bn.
The spin-out in the culmination of a flurry of dealing-making by Alltel. In January it paid $4.3bn for fellow rural mobile carrier Western Wireless Corp. Then in August, Western Wireless (Alltel) sold off the fourth-biggest mobile phone operation in Austria, Tele.ring Telekom Services GmbH, to Deutsche Telekom AG for 1.3bn euros ($1.58bn).
In early September, Western Wireless (Alltel) sold off Meteor Mobile Communications Ltd, the third largest mobile operator in Ireland, for 423m euros ($520m) to the Irish telecoms carrier Eircom Group Plc.
Last week, Alltel paid $1.07bn in cash for mobile operator Midwest Wireless Holdings, which has 400,000 wireless customers in southern Minnesota, northern and eastern Iowa, and western Wisconsin.
Alltel also announced an agreement to sell the Haitian and Bolivian wireless operations it acquired from Western Wireless earlier this year for an undisclosed cash price.