Tweet
http://www.businessweek.com/bwdaily/...eek+exclusives
Sprint Nextel Rings Up Strong Profits
Sprint Nextel Posts Higher Earnings
Hell, if we are going to gut the country, let's really go all the way. Load up everything we can with debt.
Just a few years ago, a leveraged buyout of a company as big as Sprint Nextel (S) would have been unthinkable. The No. 3 wireless carrier has $41 billion in annual revenue and a market cap of $56 billion. Add in the cost of a 25% premium and the assumption of more than $23 billion in debt, and a Sprint Nextel buyout could be nearly twice as large as Texas Pacific's record $45 billion proposed buyout of power company TXU (TXU) (see BusinessWeek.com, 2/26/07, "How Green Green-Lighted the TXU Deal").
Yet at least one investment bank is taking the idea seriously. Goldman Sachs (GS) issued a report to a group of its clients on Mar. 21 examining the economics of such a deal. The report, by Jason Armstrong and other analysts, concluded that "the LBO economics are very favorable."
---
An Acquisition Scenario
One private equity expert said an LBO might be difficult to justify, though. Phillip Phan, a professor of management at the Lally School of Management & Technology at Rensselaer Polytechnic Institute, said the real value of the company is in its customers. An LBO would probably lead to sales of assets, which would limit subscriber growth. A strategic buyer such as Verizon (VZ) might make better use of the subscriber base and get more value from a deal.
Who would be in position to make such a bid? One possibility might be private equity giant Carlyle Group. The Washington-based firm is loaded with telecom veterans such as founder William Conway, a veteran of MCI. And Carlyle partner William Kennard, former chairman of the Federal Communications Commission, recently resigned from Sprint's board.
The talk of a buyout or acquisition stems from Sprint's weakened condition. It's having trouble with its business and financials, just as rivals' wireless data business is really taking off (see BusinessWeek.com, 1/23/07, "Sprint Loses Its Wireless Data Crown"). If the company can't get a handle on its problems soon, it may not be in control of its own destiny too much longer.
Yet at least one investment bank is taking the idea seriously. Goldman Sachs (GS) issued a report to a group of its clients on Mar. 21 examining the economics of such a deal. The report, by Jason Armstrong and other analysts, concluded that "the LBO economics are very favorable."
---
An Acquisition Scenario
One private equity expert said an LBO might be difficult to justify, though. Phillip Phan, a professor of management at the Lally School of Management & Technology at Rensselaer Polytechnic Institute, said the real value of the company is in its customers. An LBO would probably lead to sales of assets, which would limit subscriber growth. A strategic buyer such as Verizon (VZ) might make better use of the subscriber base and get more value from a deal.
Who would be in position to make such a bid? One possibility might be private equity giant Carlyle Group. The Washington-based firm is loaded with telecom veterans such as founder William Conway, a veteran of MCI. And Carlyle partner William Kennard, former chairman of the Federal Communications Commission, recently resigned from Sprint's board.
The talk of a buyout or acquisition stems from Sprint's weakened condition. It's having trouble with its business and financials, just as rivals' wireless data business is really taking off (see BusinessWeek.com, 1/23/07, "Sprint Loses Its Wireless Data Crown"). If the company can't get a handle on its problems soon, it may not be in control of its own destiny too much longer.
Sprint Nextel Posts Higher Earnings
Hell, if we are going to gut the country, let's really go all the way. Load up everything we can with debt.
Comment