Wedding bells were ringing yesterday as two regional wireless service providers found common ground and merged together. Alamosa Holdings (NASDAQ:APCS) and AirGatePCS (NASDAQ:PCSA) finally agreed to tie the knot after courting for months.
Both companies are affiliates of Sprint PCS (NYSE:FON), offering wireless service under the Sprint name in select markets. The stock swap deal involves Alamosa offering 2.87 shares for each AirGate share, marking the dowry at $630 million when $238 million of assumed AirGate debt is accounted for.
The offer prices AirGate shares at approximately $33, well above the $27 they were priced at prior to a $355 million offer Alamosa made for AirGate a month ago. Alamosa had actually made a private offer to AirGate previously but made its offer public in November when it felt its fellow affiliate was dragging its feet and not giving the deal serious consideration.
However, AirGate was actually weighing more than one offer to merge. Other Sprint affiliates such as UbiquiTel (NASDAQ:UPCS) had shown interest in combining with AirGate. To hurry the deal along, Alamosa pitched a sweet deal to public shareholders and put a deadline of Dec. 6 on the negotiations.
The deal makes a lot of sense geographically and financially. Alamosa offers services in dozens of markets across several Midwestern states while AirGate serves three Southeastern states -- North Carolina, South Carolina, and Georgia. Together, the new entity will serve roughly 1.25 million subscribers, making it the largest Sprint affiliate.
Both companies cited the advantage of scale as a significant benefit of the deal. Operating together, the companies hope to reduce redundant expenditures and increase margins.
The merger follows the landmark $41 billion Cingular Wireless (owned jointly by SBC Communications (NYSE:SBC) and BellSouth (NYSE:BLS)) deal to purchase rival AT&T Wireless. Most analysts agree that there is still more M&A in the works too -- as more and more potential suitors get snapped up, the urge to merge increases because no one wants to be left at the alter.
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Fool contributor Dave Mock loves his wife dearly but never would have married her if it included assuming $238 million in debt. He owns no shares of companies mentioned here.
