Alltel sells AIS, prepares to go buying.
The $775 million cash portion of the deal will build a corporate war chest to buy small wire less and wireline companies as well as pieces of bigger companies.
Alltel is expected to net an estimated $600 million after taxes that can be multiplied in size through leveraging.
During a press conference held at Alltel headquarters last week, President and CEO Scott Ford said it felt a little strange playing the role of seller instead of buyer.
He appeared eager to return to the telecommunication shopping aisles and put the sales proceeds to work adding to Alltel's telecom holdings.
"This sale is good for our core business," Ford said. "Hopefully, this will allow us to more aggressively grow our core business."
Alltel Information Services is a leading provider of information services for the banking industry, including software and mortgage servicing.
The sale of AIS, which is expected to close by March 31, also will make Alltel one of the largest shareholders in Fidelity National Financial Corp. of Irvine, Calif.
The $275 million stock swap portion of the deal represents more than 8.3 million shares (based on Fidelity National's Jan. 29 closing price of $32.86).
Alltel's stake represents 8.7 percent of Fidelity National's outstanding shares. Ford said the deal will make Alltel the largest non-management stockholder in Fidelity National.
In recognition of the company's newfound position, Ford will be joining Fidelity. National's board of directors. The deal was brokered by Little Rock's Stephens Inc. and New York's Goldman Sachs.
Alltel officials valued the transaction at about 11.6 times earnings.
In round numbers, the assets that generated about $820 million of AIS' total revenue of $990 million will be sold to Fidelity National. The balance is dominated by telecom support services.
The value of the assets sold, which include the AIS campus in west Little Rock, represent about 6.7 percent of Alltel.
Alltel executives are upbeat that the sale of its information services subsidiary to Fidelity National will not result in job losses.
"This is a very strategically shifting deal for Fidelity," Ford said. "I think the jobs with AIS will be very safe because there is no business overlap."
The deal affects about 5,500 AIS employees across the nation. Of those, about 1,200 work in Alltel's retail banking operations in Little Rock.
Does the sale make Alltel a more alluring merger candidate?
"This is about funding the growth of our business," Ford said. "I can't speculate on how people might view us in terms of being a more attractive takeover target."
Alltel generated total revenue of $8 billion during 2002, a 6 percent increase from 2001. Net income was $1 billion, a 14 percent climb.
Alltel shares closed Jan. 29 at $47.60, down 55 cents. Fidelity shares closed the day at $32.86, up 35 cents.
"The buzz on the street is good," Ford said. "News of the sale was very well received."
A TV reporter who didn't recognize Jeff Fox, Alltel's information services group president, asked if he was with Fidelity National.
"That depends on who you ask," Fox replied.
During a hallway conversation, he said his future with Fidelity National will be determined by the outcome of negotiations with the company's chairman and CEO, William Foley. Fox indicated he would like to remain aboard at AIS.
He said Fidelity National will be gaining a revenue stream that is less cyclical than its interest rate-sensitive core business.
"The reaction so far among the XIS employees is very positive," he said. "I'm going to tell them it's a big opportunity for them."
Fidelity National reported a $531.7 million profit during 2002, reflecting a whopping 74 percent leap. Total revenue during 2002 grew by 31 percent to $5.08 billion.
Ford said Fidelity National was among "several" unnamed candidates interested in acquiring AIS. He declined to name any of the other firms or say exactly how many companies were among the suitors.
"We tried to select the company that gave us the best value and best fit the needs of the AIS customer base and employees," Ford said.
Alltel's interest in selling AIS was made public a year ago, although the move was discussed as far back as 1996.
Fidelity National Financial Corp.
With the acquisition of Alltel Information Services, Fidelity National Financial Corp. of Irvine, Calif., will become one of Little Rock's larger employers. Here are some highlights of the company's history:
* Strikes $1.05 billion deal to acquire the bulk of Alltel Information Services. The purchase adds huge data processing and mortgage servicing capabilities to Fidelity National's bundling of real estate-related services that include title insurance, home warranties, flood certification, credit reporting and tax services.
* Completes acquisition of Chicago Title Corp., creating the largest title insurance organization in the world. The deal encompasses the Ticor Title and Security Union Title subsidiaries as well.
* Moves into new corporate headquarters in Santa Barbara, Calif., although SEC filings indicate the principal executive offices remain in Irvine.
* Fidelity National Title Insurance Co. merges with Alamo Title, the ninth largest title insurer in the United States.
* Acquires First Title Corp., a title company with offices throughout the southeastern United States.
* Acquires three credit reporting companies: Ifland Credit Services, Credit Reports Inc. and Classified Credit Data Inc. All three are merged and operate as Fidelity National Credit Services Inc.
* Acquires Bron Research Inc., a. flood certification company headquartered in Austin, Texas. which now operates as Fidelity National Flood Inc.
* Acquires Express Network Inc., a provider of attorney services such as courier, messenger, courthouse filing, process serving, investigation and reprographics.
* Begins trading on the New York Stock Exchange under the symbol FNF.
* Acquires Meridian Title Insurance Co. and Security Title and Guarantee Co. The deal expands Fidelity's direct operations base to include Florida, Michigan, Missouri, New Jersey, New York, North Carolina and Pennsylvania.
* Begins trading on the American Stock Exchange under the symbol FNF.
* Moves the corporate headquarters from Scottsdale, Ariz., to Irvine, Calif.
* Securities and Exchange Commission the sale of Fidelity's stock to the employees of its various subsidiaries. Fidelity became the nation's first and only employee-owned title insurance underwriter.
* Corporate offices move from Denver to Scottsdale, Ariz.
* Acquires the assets of a small underwriter in Tucson, Ariz. It was at this time the company's current principals were first affiliated with Fidelity National.
* At the time of the San Francisco earthquake and fire, employees of Western Title Insurance Co. and their wives are credited with saving the title plant arid other valuable records of the company.
* Western Title Insurance Co., now Fidelity National Title Insurance Co. of California traces its origin to C.V. Gillespie, a notary public and searcher of records San Francisco.
Source: Fidelity National Financial Corp.
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|Title Annotation:||Alltel Information Services|
|Comment:||Alltel sells AIS, prepares to go buying.(Alltel Information Services)|
|Date:||Feb 3, 2003|
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