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Verizon Outlines Alltel Integration Plan

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Replying to:  What exactly was the point of this merger? by bluecoyote   Jan 12, 2009, 4:13 PM

Re: Capital for Goldman Sachs and TPG Capital

by algorithmplus    Jan 12, 2009, 6:07 PM

I think a lot of people fail to recognize it may not be the fact that Verizon Wireless was watching Alltel and waiting for just the right moment to acquire it, but the fact that the owners wanted to sell it.

Goldman Sachs and TPG Capital jointly owned Alltel after the leveraged buyout. In less than a year, all the major investment banks in the United States have disappeared in their previous forms. Bear Stearns collapsed and was sold to JPMorgan Chase in a fire sale. Lehman Brothers filed for bankruptcy. Merrill Lynch was sold to Bank of America. Goldman Sachs and Morgan Stanly converted to traditional commercial banks to begin the foray into checking, savings, money market, and certificates of deposit.

TPG Capital is privately held, so financial information on that company is not readily available.

Goldman Sachs has suffered during the ongoing financial crisis. On October 31, 2007, Goldman Sachs had a stock price of $247.92 and today Goldman Sachs is trading at around $77 or $78. Having to absorb losses on assets held, Goldman Sachs like other financial institutions requires additional capital. Circumstances have changed drastically since Alltel's sale to private equity was first proposed back in May 2007.

Just like an individual, when you need some money, you might do a few things you wouldn't normally. Like you might decide to sell some of that extra furniture you have. You might decide to sell the coin collection you inherited from your grandfather. If you are Goldman Sachs and TPG Capital, you might decide to Alltel.

The point I'm trying to make is that everyone seems to be assuming that Verizon was lusting over Alltel and approached them to buy it. The truth is, it is very possible that Goldman Sachs and TPG Capital approached Verizon in hopes of a sale. There aren't many other companies that could buy Alltel. Not Sprint. AT&T probably wouldn't want it, the same with T-Mobile. Leap, Metro, US Cellular? Doubtful they could buy Alltel. A foreign company probably wouldn't be too interested in a CDMA2000 operator that is mostly rural.

There may be other factors outside the box.

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