Sprint-Nextel to buy affiliate for $6.5 billion

/ Source: The Associated Press

Sprint Nextel Corp. said Tuesday that it would buy outstanding shares of Nextel Partners Inc. in a deal valued at $6.5 billion, or $28.50 per share, settling a legal battle with its largest affiliate.

Nextel Partners shareholders had approved a provision in October that required Sprint Nextel to buy two-thirds of the company it doesn’t already own. Including the one-third shares that Sprint Nextel already owns in the affiliate, the deal puts the value of Nextel Partners at about $10 billion.

After Sprint Corp. acquired Nextel in August for $35 billion, several affiliates that provide wireless service to rural areas and smaller cities not served by Sprint or Nextel sued, saying the acquisition violated the companies’ agreements not to compete with the affiliates in their territories.

Sprint Nextel and Nextel Partners engaged in a monthslong fight over the value of the affiliate, which is based in Kirkland, Wash., before the companies agreed to use arbitrators to determine the affiliate’s value. Sprint Nextel is based in Reston, Va., and has operational headquarters in Overland Park, Kan.

Sprint Nextel retained Lazard Ltd., which valued the affiliate at $8.8 billion, or $27.25 per share. Morgan Stanley determined the fair market value to be $9.6 billion, or $29.75 per share. The final value was set at the average of the two appraisers’ findings, Sprint Nextel said.

The deal must be approved by the Federal Communications Commission and the Department of Justice. It is expected to be completed by the end of the second quarter of 2006.

“Sprint Nextel shares with Nextel Partners a commitment of excellence to our customers, employees and shareholders,” Gary Forsee, Sprint’s chief executive, said in a statement. “As we work through the regulatory approval processes, we intend to focus on plans for efficiently integrating Partners’ business into our operations in a way that is seamless for customers and employees.”

Nextel Partners, with 1.8 million customers in 31 states, will be the sixth affiliate bought by Sprint since the lawsuit was filed.

“From inception we have placed the interests of our investors, customers and fellow partners (employees) first and foremost,” John Chapple, Nextel Partners chairman, CEO and president, said. “We believe that aligned with Sprint Nextel we are poised to move to the next level. This is an across-the-board success. It results in an attractive price and provides certainty for all Nextel Partners shareholders.”