Verizon Communications is near a deal to buy Alltel Corp. for about $27 billion, including the assumption of debt, creating the nation's largest cellular telephone provider, people involved in the negotiations said. A deal could be announced as early as today, these people said.
The deal would catapult Verizon's wireless business ahead of AT&T Wireless, which would fall to No. 2, followed by Sprint Nextel Corp. and Deutsche Telecom's T-Mobile. A combination of Verizon, based in New York, and Alltel, based in Little Rock, Ark., would have more than 80 million subscribers. Verizon would add coverage in the Midwest and the South.
The transaction would represent one of the quickest flips in corporate history: Alltel's owners - TPG, formerly the Texas Pacific Group, and Goldman Sachs' private equity arm - just completed buying the company last fall for about $27.5 billion.
The deal appears to be driven in part by Goldman Sachs and several of the large banks that financed the original deal seeking a way out of it. Citigroup, Barclays, Royal Bank of Scotland and others were never able to sell all of the debt, which was sitting on their books at a loss.
Verizon is expected to pay about the same price that TPG and Goldman Sachs did last year. In an unusual twist, while the equity holders - TPG and Goldman - are expected to receive a small premium for their shares, some debt holders will sell at a discount, albeit at a higher price than the debt would fetch on the market.
Verizon Wireless executives declined to comment. Alltel executives did not return calls seeking a comment.
Verizon and Alltel have been in a merger dance for years. Lowell C. McAdam, chief executive of Verizon Wireless, and Scott T. Ford, Alltel's chief executive, have known each other for a long time and have been talking on and off about a combination over the past couple of years, according to a person apprised of the talks. Rumors surfaced in 2005 that Verizon and Alltel were considering a merger and talks reignited last year, before TPG and Goldman Sachs bid for the company.
Previous efforts to strike a deal faltered in part because of opposition from Verizon's partner in its wireless business, Vodafone Group PLC, which owns a 45 percent stake.
Roger Entner, a senior vice president at IAG, a market research firm, said that the last time Verizon sought to acquire Alltel, Vodafone rejected the deal because the merger would have diluted its position in the combined companies. The current deal is being financed entirely by debt to avoid diluting Vodafone's stake, people involved in the discussions said.
