Alltel to Buy Western Wireless in $6 Billion Deal

By KEN BELSON
NYTimes.com

Published: January 11, 2005

Alltel, the nation's sixth-largest wireless carrier, announced formally yesterday that it had agreed to buy Western Wireless, a regional carrier in the Northwest, in a deal worth about $6 billion in cash, stock and debt.

The deal, which is expected to close by midyear, will create a company with about $10 billion in sales and 9.8 million subscribers, or about 6 percent of the cellphone market. Combined, the companies' networks will cover 55 percent of the United States by area and reach 25 percent of the population.

Based on Alltel's closing price yesterday, Western Wireless stockholders will get $38.54 for every share they swap. Western Wireless shareholders will have the option of receiving all stock or all cash.

To finance this deal, Alltel will issue 60 million new shares and spend $1 billion in cash. Alltel will also assume about $1.5 billion in debt from Western Wireless. Alltel expects the purchase of Western Wireless, which operates the Cellular One brand, to increase its earnings in 2006.

The buyout follows mergers involving four of the six large national cellular carriers last year and probably presages other deals between regional wireless operators. Alltel, which is the largest regional cellphone provider, could also buy other smaller rivals.

"There's been speculation about every possible permutation," said Scott Ford, Alltel's chief executive. "We would like to continue to grow the wireless business through acquisitions as long as it is on terms that make sense."

Industry analysts say that U.S. Cellular, Rural Cellular and Centennial Communications are the most likely takeover targets. Shares in these companies have risen since news of Alltel's effort to purchase Western Wireless was first reported in The New York Times on Jan. 6.

By getting bigger, Alltel may be making itself a more attractive acquisition target to a larger carrier, said Michael Grossi, an industry consultant at Adventis.

Mr. Ford said he would spend the next few months evaluating what to do with Alltel's fixed-line phone business, which represents 40 percent of the company's revenue. He said Alltel could sell the business or use it to expand its package of telecommunications services.

Alltel was advised by Stephens Inc. and Merrill Lynch. In addition, Goldman Sachs issued a fairness opinion to Alltel, whose law firm was Skadden, Arps, Slate, Meagher & Flom. Western Wireless was advised by Bear Stearns and the law firms of Wachtell, Lipton, Rosen & Katz and Friedman Kaplan Seiler & Adelman.

Alltel's shares fell 2.4 percent, or $1.37, to $54.75. Western Wireless' stock rose 85 cents, to $37.37.

Andrew Ross Sorkin contributed reporting for this article.