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VERIZON COMMUNICATIONS INC 8-K Report, Material Agreement (Jun 11, 2008)

Filed June 11, 2008For Securities:VZ

Summary

Verizon Communications Inc. (VZ) filed an 8-K on June 10, 2008, detailing a significant move by its subsidiary, Verizon Wireless. On June 5, 2008, Verizon Wireless entered into an Agreement and Plan of Merger to acquire Alltel Corporation for approximately $5.9 billion in cash. This acquisition, which will see Alltel continue as a wholly owned subsidiary of Verizon Wireless, is subject to regulatory approvals, including the expiration of the Hart-Scott-Rodino waiting period, and other customary closing conditions. The transaction also includes Alltel's projected net debt of approximately $22.2 billion, making the total enterprise value significantly higher. In conjunction with the Alltel acquisition, Verizon Wireless also secured a $7.550 billion 364-day credit facility. This facility is intended to finance the Alltel acquisition, the acquisition and refinancing of Rural Cellular Corporation, and general corporate purposes. The company has already drawn $4.795 billion under this facility to fund the purchase of approximately $4.8 billion in senior interim loans related to Alltel. This strategic move signals Verizon's intent to expand its wireless market share and strengthen its competitive position.

Key Highlights

  • 1Verizon Wireless is acquiring Alltel Corporation for approximately $5.9 billion in cash.
  • 2The acquisition is structured as a merger where Alltel will become a wholly owned subsidiary of Verizon Wireless.
  • 3The total enterprise value of the Alltel transaction is significantly higher due to Alltel's projected net debt of approximately $22.2 billion at closing.
  • 4The merger is contingent on customary closing conditions, including regulatory approvals such as the Hart-Scott-Rodino waiting period.
  • 5Verizon Wireless has entered into a $7.550 billion 364-day credit agreement to finance the Alltel acquisition and other strategic initiatives.
  • 6Verizon Wireless has already borrowed $4.795 billion under the new credit facility to fund the purchase of Alltel-related senior interim loans.

Frequently Asked Questions

This 8-K filing announces Verizon Wireless's definitive agreement to acquire Alltel Corporation for approximately $5.9 billion in cash. It also details the financing arrangements for this acquisition through a new credit facility.

The cash consideration for the acquisition of Alltel's equity is approximately $5.9 billion. However, Alltel has a projected net debt of approximately $22.2 billion at the closing of the merger, meaning the total enterprise value of the transaction is substantially higher than the cash paid for equity.

Verizon Wireless has secured a $7.550 billion 364-day credit agreement to fund the Alltel acquisition, the acquisition and refinancing of Rural Cellular Corporation, and other general corporate purposes. They have already drawn $4.795 billion from this facility to fund the purchase of certain Alltel-related debt.

Yes, the consummation of the merger is subject to several customary conditions, including the expiration or termination of the applicable Hart-Scott-Rodino waiting period and the receipt of other necessary regulatory approvals. Other conditions include the absence of any prohibitive laws or orders and the accuracy of representations and warranties, among others.