Alltel Corp., one of the nation's largest telecom service providers to rural areas, on Friday said it plans to become a pure wireless company by spinning off its wireline business and merging those operations with Valor Communications Group Inc. in a deal worth about $4.9 billion plus debt.
Including $4.2 billion in assumed debt, the total transaction is valued at about $9.1 billion, based on Valor's closing stock price on Thursday. Alltel said the deal will be a tax-free separation, and will leave it with 11 million wireless customers in 34 states.
The company said the spin-off and combination with Irving, Texas-based Valor will create a new Arkansas-based wireline company, with Alltel shareholders owning 85 percent of the new company. Valor will issue about 400 million shares of stock to Alltel shareholders, who will own 1 share of the wireless business and will receive 1.05 shares of Valor for each Alltel share.
Alltel said it expects $40 million a year in synergies from the combination, and the new entity will have $5.4 billion in total net debt.
"This transaction creates new growth opportunities for both the wireless and wireline businesses as separate entities," said Scott Ford, Alltel president and chief executive, in a statement. "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."
The company said Alltel management teams will lead the wireless and wireline businesses. Francis X. "Skip" Frantz, Alltel executive vice president and secretary, will become chairman of the combined wireline company, while Chief Financial Officer Jeffery Gardner will become president and CEO of that business.
Alltel said the deal is expected to close by the middle of next year.
