Alltel buyout deal stirs the anger of rival bidders

A decision by Alltel to go private in a $27.5 billion deal, the largest leveraged buyout in the telecommunications industry, has not gone down well with some other private equity firms that were lined up to bid for the company.

The agreement for Alltel, the wireless service provider, to be acquired by a consortium including the Texas Pacific Group and a unit of Goldman Sachs effectively short-circuits an auction process, in which other groups had hoped to participate. Among them were the Blackstone Group, with Providence Equity Partners and the Carlyle Group, with Kohlberg Kravis Roberts.

The lack of a formal auction may also raise questions among some Alltel shareholders about whether they received the highest price possible.

Some potential bidders were infuriated by the announcement Sunday that a deal had been reached because they understood the bid deadline for Alltel to be June 6, people close to the process said. The agreement comes with a standard breakup fee but no "go shop" provision, a typical clause that allows the company being acquired to seek higher offers.

"Of course they are unhappy," Scott Ford, chief executive of Alltel, said when asked about the complaints. He dismissed the idea that bids were not due until June 6.

"We said we were open for business," Ford said. "They knew what the deal was."

Texas Pacific and Goldman Sachs will pay $71.50 a share for Alltel, a premium of about 10 percent over the Friday closing price of Alltel shares and about 25 percent over its price late last year, when speculation about its future began to build.

Ford said the company had canvassed all the potential bidders before accepting the Texas Pacific-Goldman offer, and did not believe it could get a higher one.

One of the private equity consortiums had indicated in a letter to Alltel weeks ago, however, that it expected to pay $70 to $74 a share, and another consortium indicated verbally that it planned to bid higher than $71 a share, people knowledgeable about the negotiations said.

Adding to the confusion are Alltel's written instructions to bidders to model their bids assuming no more than seven times debt to equity - in other words, that they would borrow no more than seven times as much equity as they would put in. The deal that Alltel accepted is close to eight times debt to equity.

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