The animosity between Sprint Nextel Corp. and wireless affiliate Nextel Partners Inc. stepped up as Nextel Communications Inc. and its subsidiary Nextel WIP Corp.-neither of which are part of Sprint Nextel-sued to try to set rules to determine Nextel Partners’ value.
The fair market value for Nextel Partners is required as part of plans for Sprint Nextel to buy the 68-percent interest in Nextel Partners it does not already own.
The lawsuit, filed in Delaware Chancery Court, claims that Nextel Partners misrepresented the way in which a fair market value for the carrier should be set. The litigation also seeks to bar Nextel Partners from releasing results of the initial appraisal because that could influence the findings of a third appraiser.
Nextel Partners’ “put” provision calls for Sprint Nextel and Nextel Partners to appoint appraisers to determine the fair market value for Nextel Partners’ stock. If the appraisals are more than 10 percent apart, a third appraiser would be appointed to set a final value.
“Nextel seeks to have this court declare that the charter requires a level playing field between the two appraisers appointed separately by each of the parties and further declare that the charter requires that the third appraiser, whose valuation may ultimately determine the put price, must arrive at that valuation without being informed of the values determined by the first two appraisers,” Nextel contended in the court filing. “These features form the core of the charter’s valuation process, but are in jeopardy as a result of Partners’ recent actions, positions and statements.”
Nextel Partners’ market capitalization is hovering around $6.7 billion based on last week’s trading price of roughly $25 per share. Sprint Nextel claims that some of that value is connected to Sprint’s announced acquisition of Nextel last December and not a true interpretation of Nextel Partners’ value.
Nextel Partners claims that its share price has not been influenced by Sprint’s acquisition of Nextel and instead is based on its superior operating performance compared with its competitors. Analysts generally have backed Nextel Partners’ claim, noting the operator has outperformed nearly all publicly traded wireless operators over the past several quarters and has clearly trumped Sprint Nextel’s CDMA network affiliates.
“We believe that Nextel’s lawsuit has no merit and is just one more attempt to rewrite an agreement that they willingly entered into seven years ago in order to pay less than they are required to pay for Nextel Partners’ publicly traded shares under that agreement,” Nextel Partners said in a statement. “We believe that Nextel’s interpretations are wrong and its motives are transparent, and we look forward to presenting our case before the court.”
Nextel Partners added that it intends to hold Sprint Nextel responsible for any damages that “its breaches and inappropriate actions may cause Nextel Partners or its shareholders.”
Nextel Partners said it has sent proxy material to its shareholders regarding a vote on the put option and has scheduled a special meeting for the vote Oct. 24. Nextel Partners’ management recommended that shareholders vote in favor of the put option, which then would trigger an appraisal process, set to be completed by early February.
Meanwhile, a report from Zachary Research claims Sprint Nextel and Alamosa Holdings Inc. have reached an understanding to re-work their affiliate agreement or have Sprint Nextel acquire Alamosa, but are keeping details of the agreement confidential until the Nextel Partners’ appraisal process is completed.
“We do believe that there is a bid-ask out there in terms of a Sprint Nextel/Alamosa merger, but neither party wants to budge, in our opinion,” Zachary Research noted in a research report. “Since Sprint Nextel apparently refuses to lift Alamosa’s offer, Sprint Nextel, in our opinion, has convinced Alamosa to violate its fiduciary duty to its shareholders and offered Alamosa a reaffiliation deal that entails Sprint Nextel taking an equity stake and/or offering Alamosa legacy Nextel and Nextel Partners customers in Alamosa’s territory.”
Other analysts contacted by RCR Wireless News that cover the companies involved said they had not heard of any such deal, but that it was possible for some sort of agreement to exist. Most agree that Sprint Nextel is in talks with Alamosa regarding either an acquisition or reaffiliation agreement and that a deal is likely to be announced before the end of the year.