With just hours to go before the close of Q3, Alta Communications and Banc of America Capital Investors completed their acquisition of certain Upper Midwest assets from McLeodUSA Inc. The leveraged deal had originally been announced in May with an $88 million price tag, but the final sale was reduced to $84 million after months of haggling and waiting for regulatory approvals.
Senior debt financing for the transaction was provided by a banking syndicate of GE Capital, CIT Group and Home Federal Bank of Sioux Falls, South Dakota.
Included in the leveraged buyout are McLeod’s non-core ILEC operations in South Dakota, and certain overbuild CLEC and cable television assets in South Dakota, southwest Minnesota and northwest Iowa. The properties were all part of something called Dakota Telecommunications Group (DTG) until that unit was merged into McLeodUSA in 1999. As part of this more recent deal, former DTG chief Craig Anderson is once again running the show as chairman and chief executive of newly created PrairieWave Communications Inc.
“This is a well-run set of assets with a lot of cash flow,” said Phil Thompson, a general partner with Alta Communications. He added that this is the first telecom deal Alta Communications has done in approximately two years, and his first deal of 2002.
Thompson will take a board seat with PrairieWave, alongside two Banc of America investors and Carl Hirsch, a New Hampshire-based telecom entrepreneur with ties to Alta via their shared involvement in NextMedia Group Inc.
In related news, Alta Communications recently held a $477 million second close on its fifth investment vehicle. The fund – which is officially named Alta Communications Fund IX – was launched earlier this year with a $500 million hard cap, and held a $422 million first close in July, and have since closed on an additioanl $55 million. Tim Dibble, a general partner with Alta, said that his firm has circled at least one additional investor, with two more on the verge of signing up.
As with its predecessor fund, the new vehicle will mostly invest in communications services companies, although it will also dabble in software, hardware and asset plays. It will maintain its bicoastal focus, even though last August it moved its staff back to Boston following the semi-retirement of firm co-founder and San Franciscan Bob Benbow.
Perhaps the only shift in its fund-raising tradition this time around is that Alta Communications hired Boston-based Monument Group to act as a placement agent. No such firm was used on previous offerings.
Limited partners in Fund VIII, although not necessarily in Fund IX, include: Alaska State Pension Fund, BancBoston, Boston University, CalPERS, CalSTRS, Employees’ Retirement System of Hawaii, Illinois Municipal Retirement Fund, Michigan State Treasury, New Mexico State Investment Council, Norwest Equity Partners, The Travelers Group and the University of Notre Dame.