U S West Media Group and AirTouch Communications Inc. have signed a letter of intent that allows AirTouch to gain total ownership of U S West Media Group’s domestic cellular properties.
U S West will merge U S West NewVector, its domestic cellular business that has been operating under the AirTouch name for nearly a year, and its 24 percent interest in personal communications services operator PrimeCo Personal Communications L.P. into AirTouch Communications Inc., said the companies.
U S West and AirTouch value the transaction at about $5 billion. The transaction includes assumption of $2.2 billion in debt by AirTouch and the distribution of AirTouch stock to Media Group shareowners tax free.
The intended transaction replaces 1994 agreements between the two companies that called for them to combine their U.S. cellular operations and interests in PrimeCo in a multiphased transaction. AirTouch would have owned about 74 percent of the partnership, and U S West would have held a 26 percent stake, according to the old agreements.
The transaction “allowed the creation of a powerful cellular company with scale and scope advantages that are critical in a highly competitive environment,” said Richard McCormick, chairman of U S West. “This merger is consistent with the intent of AirTouch and U S West when the partnership was announced nearly three years ago, in July 1994, to create a single wireless company. But this transaction recognizes the changing competitive environment, eliminates potential business conflicts, reduces our debt and allows our shareowners to receive AirTouch stock tax free.”
“With this transaction, we have a certainty of negotiated terms rather than relying on an appraisal process,” said Arun Sarin, president and chief operating officer of AirTouch. “This transaction lets us accomplish our goal of owning U S West properties that we wish to own quicker, with less equity and more efficiently than might have been possible under the original agreement. This should be good news for Wall Street. We know [Wall Street] hate[s] uncertainty. Investors have told us that the transaction as originally structured created uncertainty which has been an overhang on our stock price.”
When the transaction is completed, AirTouch will become the second largest U.S. wireless company based on number of subscribers, said Amy Damianakes, AirTouch spokeswoman. The company said it expects to add to its proportionate U.S. cellular and PCS portfolio about 34 million pops, 1.9 million customers and $300 million in operating cash flow, based on pro-forma 1996 results.
The number of AirTouch shares to be issued will vary depending on the trading price of AirTouch stock.
AirTouch common stock closed on April 17 at $23.50.