bloggingbuyouts

So The Wall Street Journal reports today -- according to its favorite "people familiar with the situation" sentence -- that wireless provider Sprint Nextel Corp. (NYSE: S) is considering spinning off or selling its Nextel unit. This is when I hear the screeching sound of a needle scraping a record. Say what? Should we play that again?

I guess I shouldn't really be that surprised since the $35 billion acquisition of Nextel Communications Inc. in 2005 has always seemed, to say it mildly, challenging. This would be, as the Journal puts it, "a dramatic acknowledgment" that the merger has actually been a failure.

Well, only Monday we heard that Deutsche Telekom AG (NYSE: DT) may be interested in Sprint. Could it be that either Deutsche Telekom demanded such an action, or that Sprint management decided such an action could entice DT to indeed go forward with an offer (despite the probable problems such a merger could face, as Jonathan Berr outlined in his post Monday)? Without Nextel, Sprint would rid itself of much debt. It is also considered to have better handsets and fewer dropped calls, making it a more attractive target.

The differences in corporate culture made the now three-year-old merger difficult and Sprint has lost subscribers while its competitors added them. Of course, the stock price has suffered as well, down over 60% since the merger. No wonder then that Sprint is looking to undo the merger. The Journal lists several options, including selling Nextel to a consortium of investors related to Nextel's founder Morgan O'Brien. Other possibilities of course include private equity firms, or a spin off of Nextel.

This morning we have several pieces that are key for buyout and private equity investors alike. Deals are continuing as you will see below, but they are not as traditional in public to public deals, and private equity deals will be looking different than 2007 (duh!). Here is a digest of some of the deals:

Nationwide Financial Services, Inc. (NYSE: NFS) has received a buyout offer from its parent company, which already controls the company via a Class B share ownership. This will end up being a mutual insurance company again rather than a stock insurance company. At least that is the case if it agrees to be bought.

Iomega Corporation (NYSE: IOM) received a buyout offer from EMC Corp. (NYSE: EMC) that would be for $3.25, although the board has snubbed the offer. If you look at the history you'll understand why.

The Blackstone Group, L.P. (NYSE: BX) posted earnings this morning that were under estimates and actually were a net loss after charges. You'll want to see the comments from Steve Schwarzman, because this will show you the tone for 2008 in private equity land. At least they have a good dividend now.....

A complicated-sounding deal came this morning, that is really in essence not complicated. White Mountains Insurance Group, Ltd. (NYSE: WTM) is essentially buying back a 16% stake held by none other than Warren Buffett's Berkshire Hathaway (NYSE: BRK-A).

The rumors or speculation surrounding Sprint Nextel Corp. (NYSE: S) are continuing, yet it is having almost no net impact on the stock. Speculators have been noting Carlos Slim of Mexico may want to bundle this one or that even Deutsche Telecom (NYSE: DT) may want to bundle it up either in a buyout or in a strategic investment of sorts.

Alliance Data Systems (NYSE: ADS), a provider of loyalty and marketing solutions derived from transaction-rich data, announced on 5/17 it would be acquired for $81.75 in cash ($7.8 billion) by Blackstone Capital Partners (NYSE: BX). ADS is recently down $2.80 to $75.48. ADS December option implied volatility of 48 is above its 26-week average of 18 according to Track Data, suggesting larger risk.

Sprint Nextel (NYSE: S) is recently up .39 to $15.23. The Wall Street Journal reported S rejected a $5 billion investment offer from a group led by ex-Sprint Chairman Donahue according to sources. S option volume of 10,285 contracts compares to put volume of 3,125 contracts. S December option implied volatility of 37 is above its 34 according to Track Data, suggesting larger risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Sprint Nextel Corp. (NYSE: S), which operates a wireless and wireline network servicing 54 million customers, closed at $18.76. The Wall Street Journal says, "Activist investor Ralph Whitworth is turning up the heat on Gary Forsee, chief executive of Sprint, and other directors of the wireless carrier. 'We have lost confidence in Gary Forsee,' Mr. Whitworth said."

EchoStar Communications (NASDAQ: DISH) closed at $48.94. DISH announced on September 26 the proposal to spin off its technology and infrastructure assets. AT&T (NYSE: T) & DISH have been frequently mentioned over the last seven years as possible transaction partners. DISH October option implied volatility of 51 is above its 26-week average of 31 according to Track Data, suggesting larger price risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Clearwire Corp. (NYSE: CLWR) -- volatility elevated on renewed takeover chatter. CLWR, founded by Craig McCaw, builds and operates wireless broadband networks that enable internet communications. CLWR is recently up $1.13 to $24.12 on renewed and unconfirmed takeover chatter. CLWR announced partnerships with Sprint Nextel Corp. (NYSE: S) and DirectTV Group (NYSE: DTV) over the last three months. CLWR completed a $1 billion senior secured loan on 8/15/07. Soleil Securities said on 9/11, "with the laptop card about to launch by month's end, and all the strategic and financial developments that were not in place at CLWR's $25 IPO in March, we think the risk/reward is better than 50%/50% on the upside." Option volume was heavy on 9/7 & 9/10/07. CLWR September option implied volatility is at 74; October is at 63 above its 25-week average of 53 according to Track Data, suggesting larger risk.

Build a Bear Workshop (NYSE: BBW) -- call volume and volatility spikes on canceled appearance. BBW, a company providing make-your-own stuffed animal, interactive retail entertainment experience, is recently up $1.40 to $18.44. BBW cancelled a previously scheduled appearance at an upcoming conference because of "scheduling conflicts." Buckingham Research says, "we believe that the stocks current valuation doesn't price in a sale and we believe that BBW shares are interesting at current levels." BBW is expected to report EPS on 10/18. BBW announced on 6/28/07 it retained Lehman Brothers (NYSE: LEH) to assist in potential strategic alternatives to enhance shareholder value. BBW call option volume of 3,235 contracts compares to put volume of 69 contracts. BBW September option implied volatility is at 100, above a level of 54 from 60-minutes ago. BBW October option implied volatility of 81 is above its 26-week average of 40 according to Track Data, suggesting larger price risks.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Sprint Nextel (NYSE: S) has seen its shares rise as much as 16% as of Monday afternoon (after market close) as rumors and talks of a possible buyout began circulating in the media. This time, instead of Sprint rumors related to a Verizon (NYSE: VZ) buyout, South Korea's SK Telecom was seen as possible suitor for the third-largest wireless carrier in the U.S. behind AT&T (NYSE: T) and Verizon Wireless.

SK Telecom, South Korea's largest telecom operator, owns the MVNO (mobile virtual network operator) Helio, which rents airwaves from Sprint already. When asked, SK Telecom said that a possible takeover rumor regarding Sprint was "groundless". Generally, a descriptive word like that is defensive enough to make some think that no takeover is in the works. However, half the time cover is laid, the rumor turns out to be true. SK Telecom even used harsher language to state that the rumor was not true.

Perhaps SK Telecom needs to dredge up more than about $62 billion to wrest control of Sprint Nextel (based on closing price Monday afternoon) before it starts warming to the rumors. It would make the $18 billion SK Telecom buyout quite large since Sprint's valuation is more than three times its own. Would SK Telecom take such a large risk to own a national wireless carrier with one of the largest 3G wireless data networks in existence, along with 53 million customers? Never say never -- those kinds of figures would make some lick their chops if they believe the future is all-wireless. Perhaps a partial deal is more palatable for SK Telecom than an entire takeover?

With the buyout offer for Alltel (NYSE: AT) finalized, the attention is now turning to Sprint Nextel (NYSE: S). Sprint Nextel is a mobile phone and services competitor that is the third-largest mobile telephone provider in the U.S., behind AT&T (NYSE: T) and Verizon (NYSE: VZ) Wireless. Who might acquire Sprint Nextel? With Sprint operating solely in the wireless arena at this time, several industry analysts see a deal coming. AT&T and Verizon have very diversified businesses, while Sprint Nextel remains planted in the wireless arena.

Verizon Wireless operates a national wireless network that is completely compatible with Sprint's CDMA-based wireless network (but not the older Nextel wireless network), and some have thought that Verizon would look at merging with Sprint to leap ahead of AT&T as the largest wireless carrier (by subscribers) in the U.S. Verizon Wireless is just barely behind leader AT&T, so this thinking makes sense. With so much overlapping in the wireless markets, though, the logistics and regulatory scrutiny of such an arrangement would probably raise eyebrows in many circles.

But how about a more doable private equity buyout? It would not be cheap to take Sprint Nextel off the block, as prices in the range of three times that of Alltel's price (which was $27.5 billion) are being floated. Although a near-term deal is not really seen at this time, investors are pricing that kind of speculation into Sprint shares, which have seen a decent rise of over $2 per share since the Alltel deal was announced.

I've mused on possible acquisitions of U.S. wireless carriers Sprint Nextel (NYSE: S) and Alltel Wireless (NYSE: AT) before, and the rumor mill is again heating up on Alltel as of this week. The fifth-largest wireless carrier in the U.S. may be looking for a possible private equity suitor. Buyout candidates include Blackstone Group with Providence Equity Partners, TPG Capital and the private-equity arm of Goldman Sachs Group, and Carlyle and KKR, according to a report in The Wall Street Journal today.

While the unnamed sources for all this acquisition/LBO street blabber still remain at large, it follows in the footsteps of all kinds of buyout rumblings that have involved Alltel Wireless from late 2006 to the present. According to the Journal, all three private equity consortiums have begun meeting with Alltel's management, and we're sure that if that is really happening, something's afoot. As one would expect, representatives from Alltel and all three groups could not be reached for comment. Yet.

Acquisition mania has been fueled by executive comments since February, when a conference call revealed that Alltel was weighing all strategic options. In general, that means that the company is looking to be bought and possibly merged with another like company (namely Verizon Wireless (NYSE: VZ)) or taken private (which I highly doubt). Another possible merger suitor would be Sprint Nextel, which runs a compatible wireless network and would love to fold in Alltel's customers in an effort to catch up to AT&T (NYSE: T) and Verizon. And the rumor mill keeps churning . . .

With Sprint Nextel (NYSE: S) bleeding customers and cash lately, CEO Gary Forsee may see 2007 mark the end of his career at the telecom giant. Sprint's Q1 numbers were way below the competition, as the company's botched acquisition of Nextel in 2005 has proved disastrous for the combined company. Why? Well, Sprint management must have given Nextel subscribers the cold shoulder after the deal closed, which is too bad considering Nextel wireless subscribers brought in the highest monthly bill and were the most loyal. Well, they were before the merger anyway.

It's been rumored that Verizon Wireless (45% owned by Europe's Vodafone) was possibly interested in a deal to acquire Sprint Nextel. In the wireless telecommunications game here in the U.S., mega-mergers have been a mainstay. Verizon was eclipsed by Cingular Wireless (now AT&T (NYSE: T)) a few years ago when Cingular Wireless bought the "old" AT&T Wireless. With Sprint Nextel having a poor reputation but a huge wireless customer base of over 53 million, are things ripe for a corporate takeover or even a buyout by private equity?

Verizon Wireless uses the same technology as Sprint Nextel, so the acquisition and fold-in would be technically very easy, although many wireless licenses would have to be disposed of somehow and the duplication in equipment would be an issue. How about Alltel Wireless, the fifth-largest wireless carrier in the U.S.? Like Sprint Nextel, Alltel uses the same technology as Verizon Wireless, making it a viable takeover candidate as well.

A purchase of Sprint Nextel (or a merger) or Alltel Wireless by Verizon Wireless would again put Verizon Wireless atop AT&T as the largest wireless carrier in the U.S. -- by a huge margin. Speculation has run rampant for a little under a year that this would happen, but no action so far. Whatever the interests of private equity, the rapid combination of wireless companies in the U.S. is far from over.