AirGate PCS and iPCS merge

AirGate PCS has agreed to acquire iPCS in a deal that creates the nation’s largest Sprint PCS affiliate in terms of covered population.

Expected to close in February 2002, the merger combines AirGate’s footprint--covering most of South Carolina and portions of North Carolina--with iPCS’s markets in Illinois, Iowa, Michigan and Nebraska.

The companies currently cover about 11 million pops and ultimately cover 12 million after iPCS completes its network build. The combined company will serve more than 300,000 subscribers.

Once the merger is complete, iPCS will continue operations as a wholly-owned subsidiary of AirGate. iPCS President and CEO Tim Yager will vacate those positions to the board of the combined company.

Under the terms of the deal, AirGate will issue about 12.4 million shares of its common stock in exchange for privately-held iPCS and will reserve an addition 1.1 million shares for issuance upon the exercise of outstanding iPCS options and warrants. AirGate shareholders then will own about 52.5% of the merged company with iPCS shareholders owning 47.5%.

Assuming the full conversion of these options and warrants, the deal has a value of about $803 million. In addition, AirGate will assume $97 million of iPCS net debt.

The combined company is expected to turn EBITDA positive in the third calendar quarter 2002, and is fully funded with room to spare, said Alan Catherall, AirGate’s chief financial officer.

“Early indications are, by time we turn EBITDA positive on a combined basis, the cash cushion will be $130 million to $140 million,” he said.