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VoiceStream buys Aerial
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September 20, 1999: 2:43 p.m. ET
Seattle-area wireless firm pays $3.5B in stock and debt for Midwest company
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NEW YORK (CNNfn) - Cellular phone company VoiceStream Wireless Corp. announced plans Monday to buy Chicago-based Aerial Communications Inc. for $3.5 billion in stock and debt, increasing its nationwide footprint in a hot mobile-phone market.
The transaction is the latest in a wave of consolidation in the cell-phone business, following U.K.-based Vodafone's $56 billion buyout of AirTouch Communications of the United States. VoiceStream itself announced a $4.5 billion purchase of Omnipoint Corp. in June.
Piecing together two key home bases toward a national cell-phone service network, VoiceStream pairs its strengths in the Northwest and Southwest with Aerial's home base in the Midwest and Florida. The deal is expected to close in early 2000.
"Aerial's markets are both attractive and highly complementary to VoiceStream's ever-expanding footprint across the United States," said John Stanton, VoiceStream's chairman and chief executive officer.
With Aerial, VoiceStream will boost its potential national cell-phone service coverage to roughly 75 percent of the nation, from about 65 percent before. That will help the company boost cost savings, by consolidating service, and revenues, by appealing to customers who want to use their mobile phones across more of the country, analysts said.
"They're just expanding the footprint," said Christopher Larson, an analyst at Prudential Securities. The combination of VoiceStream with Aerial and Omnipoint creates a company with nearly 1.5 million customers.
The two companies both rely on a technology called GSM, short for Global System for Mobile Communications, which is the standard most often found outside the United States. American mobile-phone leaders Sprint PCS (PCS), AT&T (T) and Nextel (NXTL) all use a different standard.
Investors soon began to see upside prospects of the deal, as the two company stocks began to pick up steam around midday. Shares of Aerial (AERL) shot up 6-11/16 to 26-11/16; VoiceStream (VSTR), after falling initially on the announcement, bounded up 6-3/16 to 62-1/4.
Many voices on the merger hotline
VoiceStream, of Bellevue, Wash., plans to offer 0.455 share, or roughly $25.51 in stock, for every Aerial share, a 27.5 percent premium over Friday's closing price. Aerial shareholders can opt to accept $18 a share cash instead of VoiceStream stock.
That part of the offer is worth about $1.8 billion. However, as part of the complex multiparty deal, Telephone and Data Systems will exchange $420 million in convertible debt into stock at $22 a share. When all is said and done, VoiceStream will boost its current number of outstanding shares to about 116 million, from roughly 72 million currently.
Chicago-based TDS (TDS), Aerial's controlling shareholder, is expected to have a 14 percent stake in VoiceStream after the deals are completed.
Meanwhile, the Finnish telecom company Sonera Ltd., another Aerial shareholder, said it will buy $230 million of new Aerial stock at $22 per share.
After all is said and done, Aerial will have roughly 116 million shares outstanding -- up from about 72 million today. At that count, based on Aerial's close Friday, the deal is worth $2.96 billion in stock.
According to an Aerial spokesman, VoiceStream also will assume about $244 million in Aerial zero-coupon notes and accrued interest, $79 million in debt held by Finnish cell-phone company Nokia, and $170 million in other TDS debt.
Separately, Sonera also said it will invest $500 million in VoiceStream at the Omnipoint closing, at a price of $57 per share, boosting its total stake in VoiceStream to 7.9 percent.
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VoiceStream
Aerial
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