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May 21, 2007 10:38 pm

Alltel under fire after $27.5bn agreed bid

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Alltel’s decision to agree to a $27.5bn bid from Texas Pacific Group and the private equity arm of Goldman Sachs has come under fire from potential rival bidders amid complaints the auction of the fifth-largest US mobile phone carrier was cut short.

Several private equity firms were eying the Arkansas-based Alltel but there were concerns about the company’s high price.

Alltel shares had been rising since the company was first identified as a buy-out candidate in December and closed at the end of last week at $65.15. The winning offer from TPG and Goldman Sachs Capital Partners was $71.50 per share, a 10 per cent premium to Friday’s close and about 23 per cent above where the shares were trading before bid rumours surfaced in December.

Alltel is the fifth-largest US mobile phone operator with 12m customers.

Goldman and TPG are expected to put about $4bn of their own equity into the deal, according to a person familiar with the transaction. Banks led by Citigroup are to provide an equity bridge loan of about $600m.

However, potential rival bidders expressed surprise that an auction for Alltel that was expected to last at least another two weeks was cut short. People close to the matter said Blackstone and Providence Equity Partners were considering a bid, as were the Carlyle Group and KKR.

A person close to the auction process said Alltel had made it clear from the start that if it received what it considered a knock-out bid it could make a move at any time.

Potential rival bidding groups were not given an opportunity to beat the $71.50-per-share offer because they were not far enough along in their due diligence, one adviser said. Still, another person close to the matter said Alltel would still consider higher bids.

Alltel has long been considered a prime buy-out target because of the heavy costs it faces in building a faster data network to compete with larger rivals such as Verizon and Sprint-Nextel.

“This transaction delivers substantial and certain value to our shareholders, while providing the company with long-term partners who share our commitment to our customers, employees and the communities we serve,” said Scott Ford, Alltel chief executive.

“TPG and [Goldman] are long-term investors who are willing to make the investments necessary to continue to grow our wireless business in all of our markets. This transaction also ensures our customers can continue to rely on Alltel to deliver high-quality service.”

Mr Ford will remain as chief executive of Alltel.

Merrill Lynch, Stephens Inc and JPMorgan Chase advised Alltel. Goldman and Citigroup advised TPG and GSCP.

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