You may have been too absorbed playing with your new Apple
The deal will have AT&T paying $13 for each share of Dobson, valuing the company at $2.8 billion. When consideration is given for net debt on Dobson's books, AT&T is paying approximately $5.1 billion to capture all 1.7 million of Dobson's subscribers. The $13 per share represented a nearly 17% premium to the market price of Dobson's shares before the merger announcement.
The value of the deal is also at a slight premium to the recent private equity buyout of much larger regional service provider Alltel
AT&T justified the price paid for the rural communications company through the savings and synergies it offered to the combined entity. Since AT&T has been paying Dobson for allowing its customers to roam on its network in rural areas, that cost can be eliminated going forward. And the company estimates the merger will have a minimal impact on earnings -- only $0.03 to $0.04 a share in the first year -- and add to them in the second year and beyond.
The new influx of subscribers from Dobson will also help AT&T stretch its subscriber lead over Verizon Wireless, a joint venture between Verizon Communications
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Fool contributor Dave Mock is absorbed with watching other people absorbed with their iPhones. He owns no shares of companies mentioned here. He is the author of The Qualcomm Equation. Vodafone is an Inside Value recommendation. The Fool's disclosure policy is valued at a rich premium.