TPG Inc., the private-equity firm run by David Bonderman, provided good news for a buyout industry beleaguered by tight credit, making $1.3 billion for investors in less than a year by selling Alltel Corp. to Verizon Wireless.
TPG, based in Forth Worth, Texas, and the private-equity arm of Goldman Sachs Group Inc. will receive $5.9 billion in cash as part of the $28.1 billion purchase announced today. The buyout firms committed $4.6 billion in equity for the deal, which closed in November.
The 28 percent gain comes as the private-equity business copes with a financing drought triggered by the collapse of the subprime-mortgage market. Investment banks, whose loans make leveraged buyouts possible, have curtailed lending as they rebuild capital after taking more than $386 billion of credit losses and asset writedowns.
``It gives the private-equity firms a shot in the arm,'' said Chip MacDonald, a mergers and acquisitions lawyer and partner with Jones Day in Atlanta. ``They haven't had a bang-up success like this in a while.''
Buyout firms this year have focused on minority transactions in troubled businesses such as financial services. TPG led a $7 billion minority investment in Seattle-based Washington Mutual Inc., the largest U.S. savings and loan. It also bought a 23 percent stake in Bradford & Bingley Plc, the U.K.'s largest lender to landlords, for 179 million pounds ($350.1 million).
Debt Terms
Verizon Wireless, based in Basking Ridge, New Jersey, agreed to pay 2.1 percent more than the $27.5 billion TPG and Goldman paid last year. Verizon Wireless is jointly owned by New York-based Verizon Communications Inc. and the U.K.'s Vodafone Group Plc. The purchase of Little Rock, Arkansas-based Alltel will make Verizon Wireless the largest U.S. mobile-phone company.
TPG and New York-based Goldman used $24 billion in debt from lenders including Citigroup Inc. and Goldman's investment bank to buy Alltel.
As part of the sale, Verizon Wireless will pay off most of Alltel's debt at face value, with the exception of a $5 billion bridge loan that it will pay at a $200 million discount, according to a banker with knowledge of the deal. That could help free up financing by taking a chunk from a committed-debt backlog that reached $400 billion last year amid record deal- making.
Smoothing Relations
The transaction also may help ease tensions between private-equity firms and investment banks, which have fought over terms promised during the boom of 2006 and 2007. The purchase of Clear Channel Communications Inc. by Bain Capital Partners LLC and Thomas H. Lee Partners LP almost collapsed amid litigation.
Banks must find a way to sell debt backing the takeover of BCE Inc., which would be the largest LBO on record, as well as deals for Clear Channel Communications Inc. and Penn National Gaming Inc.
Toronto-Dominion Bank, Citigroup, Deutsche Bank AG and Royal Bank of Scotland Group Plc promised to provide Montreal- based BCE, Canada's largest phone company, with $34.3 billion of financing, according to SEC filings.
Citigroup and five other banks have committed $19.1 billion to back the acquisition of San Antonio-based radio broadcaster Clear Channel.
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