Quadrangle, Citigroup to buy Ntelos for $750m

The two private equity firms have agreed to acquire the telecommunications company for approximately $750m, a purchase price of roughly 6.25x EBITDA.

Private equity firms Quadrangle Partners and Citigroup Venture Capital (CVC) are teaming up to acquire telecommunications company Ntelos in a transaction reportedly valued at $750 million (€579 million). The purchase price represents a multiple of 6.25 times the company’s estimated 2004 EBITDA of $120 million.

In the first step of a three-stage transaction, Ntelos will use the proceeds of a $625 million debt refinancing to repurchase up to 75 percent of its equity at $40 per share. Quadrangle and CVC will then acquire up to 24.9 percent of the equity of the recapitalized company at the same $40 per share price. Once the acquisition has received regulatory approvals, the two private equity firms will purchase the company’s outstanding equity. Ntelos’ two largest shareholders, Morgan Stanley and affiliates of Capital Research and Management, have agreed to the deal.

Quadrangle and CVC are reportedly investing a total of $150 million of equity in the deal, with each firm set to own 50 percent of the company.

The $625 million debt package, which includes a senior secured term loan of $400 million and a $225 million secured second-lien loan, represents a debt-to-EBITDA multiple of 5.2 times. The refinancing, led by Morgan Stanley and Bearn Stearns, also included a $35 million revolving credit facility.

Ntelos, a provider of voice, wireless and broadband services to customers in Virginia, West Virginia and portions of Kentucky, Tennessee, Ohio and North Carolina, emerged from bankruptcy protection at the end of 2003. As part of its Chapter 11 reorganization plan, former senior noteholders became owners of 94 percent of the company.

Quadrangle, founded in 2000 by former executives of Lazard Freres, manages $2.5 billion in capital through a $1.1 billion private equity fund focused on the media and communications industries, Quadrangle Capital Partners, and a $1.4 billion distressed debt fund.

Citigroup Venture Capital, the private equity arm of financial giant Citigroup, was founded in 1968 and currently manages $2.6 billion in capital.