Alltel's New Private Equity Plan

Buyout rumors have buzzed since late December for wireless operator Alltel (NYSE:AT). Despite this, Wall Street was still surprised that TPG Capital and Goldman Sachs (NYSE:GS) were willing to shell out $27.5 billion for the company. On the news yesterday, Alltel's stock price increased 6.73% to $69.60, which is actually 2.7% below the offering price of $71.50.

On its face, the 9.7% offered premium looks paltry. The company was quick to point out in its press release, though, that the offer price actually represents a 23% premium to the price of its shares prior to reports that the company was reviewing "strategic options."

Even though it has 12 million customers, Alltel is still a small player when compared with biggies like Verizon Wireless (NYSE:VZ), Sprint Nextel (NYSE:S), and AT&T (NYSE:T).

Alltel has been quite nimble, however. Over the past couple years, the company spun off its landline business as Windstream (NYSE:WIN) and acquired several wireless players like Western Wireless and Midwest Wireless.

As Fool colleague Dave Mock noted in a recent piece, the company picked up 237,000 net customers in the first quarter and churn was at an all-time low of 1.8%. The buyout valuation is at about 15 times trailing-12-month cash from operations, which, compared with other recent mega-buyouts, is on the high side.

As is common for all big deals, I suspect we'll see plenty of litigation, and there could be the possibility of a higher bid. But for Foolish investors, it's probably best to take your winnings off the table.

For related links:

• The Multinational M&A Monster
• All's Well With Alltel
• Alltel Rings True: Fool by Numbers

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is ranked 1,898 out of 28,990 rated investors in Motley Fool CAPS. Windstream is a Motley Fool Income Investor selection. The Motley Fool has a disclosure policy.