A club deal may be in the works for Alltel, the fifth largest wireless phone service provider in the United States. Little Rock, Arkansas-based Alltel has nearly 12 million subscribers and a $24 billion (€18 billion) market capitalization.
At least three consortiums – The Blackstone Group and Providence Equity Partners, TPG and Goldman Sachs, and the Carlyle Group and Kohlberg Kravis Roberts – are in preliminary discussions to take the regional wireless carrier private, according to a Wall Street Journal report.
Sources close to the process have said chances of a deal being struck are “50-50”, noting potential suitors’ concerns over “the high cost and equity commitments”. Some analysts are predicting a $30 billion deal will take place within a year.
Mobile phone service providers have long been attractive targets to private equity and venture capital firms.
Alltel competitor MetroPCS, which recently raised $1.15 billion in a public offering, was backed by Battery Ventures and Accel Partners from its formation 13 years ago, while US firms including Madison Dearborn, TA Associates, Columbia Capital, and HarbourVest Venture Partners invested in later years.
Club deals have been a source of controversy in recent months as an increasing number of firms join forces to carry out bigger and bigger deals. The US Department of Justice has launched an investigation into the “potential collusion by large buyout firms” resulting in anticompetitive behaviour, while supporters argue such deals spread out risk and expose portfolio companies to a greater number of experts, thus benefiting investors.