This spin-off enhances Alltel’s prospects

Article Excerpt

ALLTEL CORP. $63 (New York symbol AT; WSSF Rating: Average) has agreed to merge its traditional wire line local and long-distance phone operations with Valor Communications Group, so it can focus on its fast-growing wireless operations. Alltel stockholders will then receive one common share in the new wireless-focussed Alltel, plus 1.05 common shares of the new local/long distance-focussed Valor. Alltel investors will only be liable for capital-gains taxes when they sell their new Valor shares. Post-spinoff, Alltel will cut its annual dividend rate from $1.54 a share to $0.50, for a yield of 0.8%. But the new Valor will pay an annual dividend of $1.00 a share, so the spin-off will have little overall impact on the income from an existing Alltel holding. Valor will take on most of Alltel’s long-term debt, so Alltel will have the flexibility to expand its network, or make acquisitions. A smaller Alltel, without a controlling stockholder, could also become an attractive takeover target for a larger wireless…

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