Alltel deal not your typical quick flip

By Megan Davies

NEW YORK (Reuters) - The $28.1 billion (14.4 billion pounds) sale of Alltel Corp. just seven months after two private equity firms bought the wireless carrier isn't a typical 'quick flip', more an opportunistic deal amid a tough credit market.

TPG Capital TPG.UL and Goldman Sachs Group Inc.'s (GS.N) GS Capital Partners bought the phone company in November in a $27.5 billion leveraged buyout -- the largest-ever private equity investment in the U.S. wireless industry.

Under the deal announced on Thursday, Verizon is paying $5.9 billion for the equity part of Alltel, making a $1.3 billion profit for the buyout firms, which invested $4.6 billion equity in the original deal, two sources close to the deal said.

That works out to their earning about 1.3 times their equity investment -- which may sound juicy for such a short time but is below the typical two-to-three times earnings that private equity firms usually require.

"Three to five years is a normal frame for a private equity firm to hold an asset," said David Stone, a lead partner at law firm Neal Gerber Eisenberg LLP, who was not involved in the deal. "In a sizzling market, they'll do turns in a year or two. This is anything but a hot market."

But in Alltel's case, the owners were not marketing the company for sale, two of the sources familiar with the deal said. It happened because Verizon's Chief Executive Ivan Seidenberg approached Goldman Sach's CEO Lloyd Blankfein a few months ago, one of those sources said. Talks began in earnest in the past few weeks.

Verizon has been long seen by analysts as a natural buyer for Alltel, so when the approach was made, Alltel's owners took it seriously, the two sources said.

One of the sources described it as a difficult decision to sell now, as opposed to hanging on.