Long rumored to be an attractive takeover target, mobile phone operator
( PR) is now officially for sale and has hired
Donaldson, Lufkin & Jenrette
and at least two other investment banks to find a target for Price to acquire or, more likely, find a buyer for the company.
"I'd prefer to make acquisitions. We've got a lot of cash and high margins," said Bob Price, CEO of Price Communications. "I don't really want to sell, " he quipped, "because I'd have nothing to do the next day." But bankers have said there don't appear to be any attractive acquisition opportunities for Price Communications, he said. So, Price wants to find an acquirer "for a full price." Price said he's looking to get 14.5-15 times this year's cash flow of $165 million, which would amount to at least $2.39 billion. Price said the company is working with DLJ, but he declined to name the other investment banks.
Price Communications, which owns cellular licenses that reach more than three million people in Georgia, Alabama, Florida and South Carolina, fills a perfect hole for
, the nation's largest wireless operator, Art Poole, wireless telecom analyst with Raymond James, says. (Verizon is the mobile-phone venture between
( AWE) is also likely to set its sights on Price, because it has licenses in many of the same areas but a limited operating network there, he explains. Raymond James hasn't performed underwriting for Price.
"As wireless progresses from regional to national and international, the six national carriers will each be looking for ways to fill in their footprints or add spectrum where needed. The sale of Price fits this thesis," Poole says. "I expect other rural cellular operators, such as
, to be potential acquisition targets as well." National U.S. carriers include Verizon,
( BLS), AT&T Wireless,
Mobile-phone carriers are largely valued on the basis of how many people their licenses can cover. On that basis, Price has a value of about $1.66 billion. But Poole says the company may sell for more than $2 billion. "If Verizon or AT&T Wireless sees Price as an important strategic asset, they may pay more than Price is worth as a stand-alone company," he says. "The ideal situation for Price is obviously multiple bidders, which could drive the valuation of Price up as much as 20% or more."
If AT&T gets its hands on Price, it would lock up a strategic hole in Verizon's territory and squeeze roaming charges out of Verizon in the future. Beyond being a burden for Verizon, an AT&T-Price deal would expand AT&T's service area since Price owns licenses in some areas where AT&T doesn't and has a fully built-out network in some areas where AT&T has the licenses but not the network. Verizon and AT&T declined to comment on whether they are interested in Price.
Price has a market capitalization of $1.17 billion, $200 million in cash flow and $700 million in debt. Compared to its peers, it trades at a modest multiple of 10 times estimated 2000 EBITDA, Poole says. "Price has achieved a high level of penetration and has strong cash flow margins," he says, adding, "Bob Price is not a guy I'd call a 'pressured seller.' I think he enjoys running this business." Price's stock price closed Tuesday at 20 3/4.