VALOR Communications Group, Inc. Announces Merger with Alltel's Wireline Business
December 09 2005 - 6:00AM
PR Newswire (US)
Transaction Creates the Leading Rural-Focused Wireline Company in
the U.S. IRVING, Texas, Dec. 9 /PRNewswire-FirstCall/ -- VALOR
Communications Group, Inc. (NYSE:VCG) today announced that its
Board of Directors has approved an agreement in which VALOR would
merge with Alltel's (NYSE:AT) Wireline business segment ("Alltel
Wireline"). Alltel Wireline will be spun off and then merged with
VALOR Communications Group, Inc. in a Reverse Morris Trust
transaction that will create the leading rural-focused wireline
company with 3.4 million access lines in 16 states. In the
transaction VALOR will issue approximately 400 million shares of
stock in exchange for Alltel Wireline stock. Upon completion of the
transaction, VALOR shareholders will own 15 percent of the combined
entity. VALOR will host a conference call today at 11:00 a.m. (EST)
to discuss the merger. Details appear later in this press release
under "Conference Call Information." Transaction Highlights *
Creates the leading rural-focused wireline company * Highly
complementary rural market footprint * Ease of integration (VALOR
uses the Alltel billing platform) * Greater economies of scale and
scope will produce synergies for the combined company of
approximately $40 million on an annual basis * Better
diversification of customers, revenues and earnings across a
broader geographic area * Pro Forma capital structure results in
lower leverage and lower cost of capital * Company headquarters to
be located in Central Arkansas * Current Alltel executives to
assume senior leadership roles; VALOR executives to play key roles
"This combination creates the clear industry leader in rural
wireline telecom. Our leverage and payout ratio will decrease
significantly and the combined company will have larger scale, a
well clustered rural footprint and a stronger competitive position.
We also have a common billing platform already in place, which
reduces integration risk," said Jack Mueller, VALOR Communications
Group president and chief executive officer. Pro Forma Highlights *
Approximately 3.4 million access lines across 16 states * Revenues
of $3.4 billion for LTM 9/30/05 * OIBDA of $1.7 billion for LTM
9/30/05 * Leverage of approximately 3.2 times * Payout ratio in the
65-70% range Mr. Mueller also stated, "As part of our previously
discussed focused strategy, VALOR continually reviews strategic
transactions and believes that this transaction provides
significant value creation for our shareholders. In addition, I
believe the combined company will be able to better leverage
existing infrastructure creating cost savings opportunities,
financial flexibility and potential for further value creation."
"VALOR is a very good fit with the Alltel wireline business and the
combined companies will add value for our shareholders," said Jeff
Gardner, president and chief executive officer of the new company.
"I am pleased that the new company will add senior leadership from
VALOR's current team and I look forward to working with my
colleagues at VALOR to run our new company," added Mr. Gardner. The
transaction is expected to close by mid-2006 and requires approval
from VALOR shareholders, federal and state regulators and a letter
ruling from the Internal Revenue Service approving the tax-free
status. Voting Agreements Shareholders representing approximately
42% of the VALOR share ownership have entered into voting
agreements pursuant to which they have agreed to vote in favor of
this transaction. Dividends VALOR also announced that its Board of
Directors has declared a dividend of $0.36 per share of common
stock for shareholders of record on Dec. 31, 2005. The dividend is
payable on Jan. 16, 2006. VALOR plans to continue paying its
current dividend through the date of closing. Post closing the
combined company expects to pay an annual dividend of $1.00 per
share. 2005 Outlook For the full year 2005, VALOR maintains its
expectations of cash available to pay dividends, as defined in its
third quarter 2005 earnings release, of $128 million to $133
million on a pro forma basis. The company continues to expect full
year 2005 capital expenditures of approximately $59 million.
Advisors VALOR was advised on the transaction by Wachovia
Securities and Kirkland & Ellis, LLP. Wachovia Securities and
Bear, Stearns & Co., Inc. rendered fairness opinions regarding
the transaction to VALOR's board of directors. Conference Call
Information VALOR will host a conference call and simultaneous
Webcast to discuss the Alltel Wireline merger at 11 a.m. (EST) on
Fri., Dec. 9, 2005. Presentation slides and the webcast links are
available from VALOR's website at http://www.valortelecom.com/ in
the investor relations section. To access the call, dial
1-800-218-0204, or outside the United States, dial 1-303-262-2075.
A pass code is not required. A replay of the call will be available
beginning at approximately 1 p.m. (EST), Dec. 9, 2005, through Dec.
16, 2005, by calling 1-800-405-2236 or, outside the United States,
1-303-590-3000. The pass code for the replay is 11048044#. The
webcast replay will be available after the call from the link on
our website. Non-GAAP Measures Historically, VALOR has presented
certain non-GAAP measures that we believe to be useful indicators
to investors in our common stock. These measures include both
adjusted EBITDA and Cash Available to Pay Dividends (CAPD). We have
introduced a new non-GAAP measure, Operating Income Before
Depreciation and Amortization (OIBDA), in this release because it
is a measure that is currently utilized by Alltel Wireline and we
believe it is useful to present the same measure for comparative
purposes. Also, it is likely that upon the closing of this
transaction the combined entity will present this measure. A
reconciliation of Operating Income, as determined under Generally
Accepted Accounting Principles, to OIBDA for VALOR, Alltel
Wireline, and the pro forma combined entity have been included in
the table that follows. We plan to continue to present adjusted
EBITDA and CAPD in our future releases until such time as the
transaction has been completed. This press release includes
management's estimate of pro forma CAPD for the year ending
December 31, 2005. VALOR believes the most directly comparable GAAP
measure would be "Net cash provided by operating activities." Due
to the difficulty in forecasting and quantifying the amounts that
would be required to be included in this comparable GAAP measure,
VALOR is not providing an estimate of net cash provided by
operating activities for the year ending December 31, 2005 at this
time. About VALOR Communications Group VALOR Communications Group
(NYSE:VCG) is one of the largest providers of telecommunications
services in rural communities in the southwestern United States.
The company, through its subsidiary VALOR Telecom, offers to
residential, business and government customers a wide range of
telecommunications services, including: local exchange telephone
services, which covers basic dial-tone service as well as enhanced
services, such as caller identification, voicemail and call
waiting; long distance services; and data services, such as
providing digital subscriber lines. VALOR Communications Group is
headquartered in Irving, Texas. For more information, visit
http://www.valortelecom.com/. Information contained on our website
does not comprise a part of this press release. Safe Harbor
Statement Certain matters discussed in this press release may
constitute "forward- looking statements" within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. Words such as "believes,"
"anticipates," "expects," "intends," "estimates," "projects, "
"outlook" and other similar expressions, which are predictions of
or indicate future events and trends, typically identify
forward-looking statements. Statements in this press release
regarding VALOR Communications Group's business that are not
historical facts, including our intention to pay quarterly
dividends and our 2005 outlook, are forward-looking statements.
Forward-looking statements involve risks and uncertainties that
could cause actual results or the timing of events to differ
materially from those described in the forward-looking statements.
We cannot assure you that the expectations discussed in these
forward-looking statements will be attained. Some of the factors
that could cause actual results or the timing of certain events to
differ from those described in these forward-looking statements
include, without limitation: our leverage and debt service
obligations; the terms of our credit facility and our rights and
obligations there under; any adverse changes in government
regulation; the risk that we may not be able to retain existing
customers or obtain new customers; the risk of increased
competition in the markets we serve; our financial position,
results of operations and availability of capital; and other risks
detailed from time to time in our filings with the Securities and
Exchange Commission, including, without limitation, the risks
described in our Prospectus dated July 1, 2005, relating to our
senior notes exchange offer and in our Annual Report on Form 10-K
filed on March 31, 2005 with the Securities and Exchange
Commission. We disclaim any obligation to publicly update or revise
any forward-looking statement, whether as a result of new
information, the occurrence of future events or otherwise, except
as required by law. VALOR Communications Group, Inc. Pro Forma
Financial Measures Reflecting Merger With Alltel Wireline (dollars
in millions) (Unaudited) Alltel Pro Forma Pro Forma OIBDA for the
twelve Wireline Valor Adjustments Combined months ended December
31, 2004 Operating income under GAAP $667.6 $177.1 $270.2 (a)
$1,114.9 Depreciation & amortization 508.5 86.5 - 595.0 OIBDA
$1,176.1 $263.6 $270.2 $1,709.9 Alltel Pro Forma Pro Forma OIBDA
for the twelve Wireline Valor Adjustments Combined months ended
September 30, 2005 Operating income under GAAP $656.2 $164.5 $268.1
(a) $1,088.8 Depreciation & amortization 482.9 89.6 - 572.5
OIBDA $1,139.1 $254.1 $268.1 $1,661.3 Alltel Pro Forma Pro Forma
Net Debt to OIBDA for the Wireline Valor Adjustments Combined
twelve months ended September 30, 2005: Long-term debt, including
current maturities $281.9 $1,180.7 $3,926.5 (b) $5,389.1 Cash and
cash equivalents (8.4) (46.7) - (55.1) Net debt (A) $273.5 $1,134.0
$3,926.5 $5,334.0 Operating income under GAAP $656.2 $164.5 $268.1
(a) $1,088.8 Restructuring and other charges 11.8 - - 11.8
Depreciation and amortization expense 482.9 89.6 - 572.5 OIBDA (B)
$1,150.9 $254.1 $268.1 $1,673.1 Net debt to OIBDA (A) /(B) 4.5 x
3.2 x (a) - Adjustment for Royalty expense under the Alltel brand
name to discontinue. (b) - Adjustment to reflect the amount to
leverage the Alltel wireline acquisition. DATASOURCE: VALOR
Communications Group, Inc. CONTACT: Investors: Keith Terreri or
Sheryl Seyer, +1-972-373-1296, or fax: +1-972-373-1150, or, ; or
Media: Cynthia T. Cruz +1-972-373-1134, fax: +1-469-420-2540, Web
site: http://www.valortelecom.com/
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