Farewell, Chad

Arkansas Business, June 9, 2008

ARKANSANS IN GENERAL AND Little Rock residents in particular thought they d dodged the bullet with the $27 billion leveraged buyout last year of Alltel Corp.

When Alltel was sold to TPG Capital and GS Capital Partners last November, most of us sighed with relief, knowing that the deal would keep Alltel based in Little Rock.

Oh, everyone speculated the day would come when Atlantis Holdings LLC, the entity created by the two firms that took Alltel private, would someday sell again. Most, however, were thinking it would be several years down the road, possibly in another initial public offering. No one--not even CEO Scott Ford, it seems--imagined a flip in less than seven months.

Ford and the state's economic development type tried to keep panic to a minimum, but Verizon will be cutting expenses--$1 billion in annual expenses by the second year--and those expenses will include nonessential employees.

Ford said it was impossible to give a detailed answer as to the infrastructure changes. Verizon has talked of putting in a regional headquarters, he said. And he said "most of the employees will become Verizon employees."

Arkansas may well get to keep a 500-worker call center, but those executive jobs that are paying six and seven figures? Not so much. The bullet we dodged last fall has circled around while we weren't watching and caught us right between the eyes.

As much as we might hate to think about the uncertainty ahead for all the Alltel employees, and the cost to those businesses they patronize, we can't argue with the good sense behind the deal.

As the The Wall Street Journal noted, "Lenders who financed last year's buyout--a separate arm of Goldman Sachs, Citigroup Inc., Barclays PLC and Royal Bank of Scotland Group PLC--have had trouble reducing their exposure to that deal, according to the people familiar with the talks. That was a driving force in the current discussions, these people say.

"Usually, lenders on big acquisitions try to sell much or all of the debt to other investors. But the credit crunch has made it much harder to find buyers. The lenders on last year's deal still hold roughly $20 billion of loans and bond financing, and investor skittishness means the debt is no longer worth what it was last year, these people say," the article said.

"The bank credit issues provided Verizon an opportunity to come in and buy up the debt," Ford said.

The companies are hoping to close the deal by the end of the year--a wise move since a new administration could bring in a less business-friendly attitude to large mergers.

By adding Alltel's current 13.2 million subscribers, the deal will make Verizon the nation's largest wireless company with more than 80 million customers and gives it a much greater footprint in rural areas. AT&T is the current leader with 71.4 million customers.

One consolation is that Verizon generally offers the best cell phone service in the areas it moves into, according to ratings listed in Consumer Reports.

But we will miss ol' Chad.