NEW YORK-The share price of Vanguard Cellular Systems Inc., Greensboro, N.C., closed up $1 at $17.13 per share March 11, the day it announced it plans to sell its Myrtle Beach, S.C., and Wilmington-Jacksonville, N.C., properties.
The big bump in the stock price wasn’t coincidental, said Brian G. Coleman, vice president and director of Toronto Dominion Securities USA Inc., New York. It represents Wall Street’s applause for these actions as part of Vanguard’s larger strategy to divest non-core assets and concentrate on Northeast corridor markets.
“One of the frustrations with Vanguard historically has been that the company invested in non-core cellular businesses that have yet to translate into significant equity value creation,” Coleman said.
“The valuations implied in these private transactions show that financial and other strategic buyers have placed robust valuations on these assets. They are a wake-up call to the public markets that the company is worth more than they thought.”
Proceeds from the sale of these properties will be used to reduce Vanguard’s long-term debt and to repurchase shares of its common stock. In tandem with the asset sale announcements, Vanguard also said its board of directors authorized the repurchase of 2.5 million common stock shares in addition to the 5 million authorized in December.
In its three core Northeast Corridor regions, which cover a population of 6.8 million, Vanguard had 565,000 subscribers as of Dec. 31. Primarily an analog carrier, which offers service under the Cellular One brand, Vanguard is phasing in Time Division Multiple Access digital technology.
Vanguard, one of the largest independent cellular carriers in the country, said it has signed a definitive agreement with United States Cellular Corp., Chicago, to sell its 48-percent interest in the Wilmington-Jacksonville, N.C., cellular operations, which cover a population of 170,000. U.S. Cellular will pay $30 million cash and assume any outstanding debt.
Triton PCS Inc., Malverne, Pa., said it has signed a definitive agreement to acquire for $160 million in cash Vanguard’s Myrtle Beach operation, which covers a population of more than 250,000. The purchase will accelerate Triton’s time to market in South Carolina, where it is building a wireless network.
“While Myrtle Beach has been an important market for us, contributing approximately $22.5 million in 1997, we believe it is in [our] company’s best interest to concentrate our resources on those regions where we have significant market clusters and competitive advantages,” said Stephen R. Leeolou, president and co-chief executive officer of Vanguard.
Vanguard recently announced Leeolou will be named CEO at the company’s upcoming annual meeting in May. He currently shares the position with Haynes G. Griffin, who will remain chairman of the board.
Triton PCS and AT&T Wireless Services Inc. formed a joint venture in October to expand AT&T’s digital wireless coverage in Virginia, North and South Carolina, Georgia and part of the Washington, D.C.-Baltimore corridor. AT&T holds a non-controlling minority share of Triton’s common stock and one of its seven board seats.
Triton PCS was formed in August 1996 by key management of Horizon Cellular Group and J.P. Morgan and Chase Capital Partners. Horizon sold its services under the Cellular One brand.
