NEW YORK (CNNfn) - CenturyTel Inc., which rejected an unsolicited $6.1 billion bid from Alltel Corp., disclosed Wednesday that it is in discussions with a number of parties to sell its wireless operations.|
Monroe, La.-based CenturyTel (CTL: up $4.09 to $34.71, Research, Estimates) is considering separating its wireless and wireline operations. The rural communications service provider said Wednesday that it had offered Alltel an opportunity to participate in the wireless talks.
"While the wireless business continues to produce strong results, CenturyTel believes that attractive acquisition alternatives are developing in the wireline sector that could drive strong growth," CenturyTel President and CEO Glen Post said in a statement.
On Tuesday, Alltel (AT: down $4.16 to $56.90, Research, Estimates) launched an unsolicited $6.1 billion bid to acquire CenturyTel, offering shareholders the choice of either $43 in cash or 0.6934 of a share of Alltel. Alltel would also assume $3 billion in debt bringing the total value of the deal to $9.1 billion.
CenturyTel rejected the bid late Tuesday, saying the offer is identical to one previously submitted. CenturyTel's board discarded that offer after full and appropriate consideration and advice from its advisors.
CenturyTel has yet to tell Alltel that its bid is inadequate, Alltel President and Chief Operating Officer Scott Ford told CNNfn Wednesday. A merger would create a combined business that would be three times larger than the next rural telecom provider, he said.
CenturyTel shareholders have only known about the bid for a short time—24 hours—and Alltel is not planning any further action for the moment, Ford said. [307 KB AIFF] or [307 KB WAV]
News of the Alltel bid caused CenturyTel's shares to surge more than 13 percent Wednesday while Alltel dropped nearly 7 percent.
Sale or merger?
CenturyTel said Wednesday it is highly suspicious of Alltel's motives in making public CenturyTel's confidential exploration of the possible separation of its wireless and wireline business.
Little Rock, Ark.-based Alltel targets the Midwest and Southeast providing wireless, local phone and long distance services to about 10 million customers.
A merger with Alltel would "create a rural communications powerhouse" with about 7.2 million wireless customers and 4.4 million wireline customers, Alltel said Tuesday.
CenturyTel offers wireless, long distance and Internet access to more than three million customers in 21 states. The local phone provider, which targets rural areas, small towns and suburbs, probably considers the $43 a share bid inadequate, said analyst James Ott, of Hibernia Southcoast Capital.
CenturyTel has bought nearly 500,000 access lines from Verizon in the past year for over $1 billion, a spokeswoman said. But CenturyTel has failed to integrate the lines as well as it did in past and the missteps have caused CenturyTel's stock to under perform, Ott said.
CenturyTel shares have been trading in the $30 a share range, down from last year's $40 a share price.
"Alltel is trying to buy CenturyTel while the stock is depressed," he said.
But analysts believe that Alltel's $43 a share offer is quite fair. In fact, CenturyTel would do better selling the company as a whole than trying to sell the wireless operations, said one analyst who declined to speak for the record.
The current offer by Alltel would dilute 2002 earnings per share by three percent but produce cost savings of $55 million, said analyst Dan Reingold of Credit Suisse First Boston.
If Alltel does raise its bid, possibly by 10 percent to $47 a share, the deal would be 14 percent dilutive to 2002 earnings. The transaction would have to produce $280 million in savings for it not affect 2002 earnings, Reingold said in a research note.
It will be difficult for Alltel to pitch its bid directly to CenturyTel shareholders, said Andrew Hamerling, an analyst at Banc of America Securities. More than 30 percent of CenturyTel's voting stock is locked up between management and the employee's stock option program (ESOP), he said.
Merrill Lynch and Stephens Inc. are advising Alltel, while J.P. Morgan and law firm Wachtell Lipton Rosen & Katz are serving as advisers to CenturyTel.