Sprint Nextel Corp.’s Nextel WIP Corp. subsidiary filed its second lawsuit in as many weeks against network affiliate Nextel Partners Inc. as part of its ongoing attempts to set a price for Sprint Nextel’s expected acquisition of Nextel Partners.
The latest lawsuit seeks access to Nextel Partners’ financial records and other documents related to how Nextel Partners determined its forecasts for future operations in recent Securities and Exchange Commission filings and the impact those numbers have had on determining its market value. Specifically, Nextel WIP said it was interested in documents Nextel Partners used to forecast its earnings before interest, taxes, depreciation and amortization for 2005 and 2006.
Nextel WIP singled out comments Nextel Partners made during its second-quarter earnings release, where it claimed at least 35-percent growth in adjusted EBITDA for 2006, compared with its guidance for $550 million in 2005 EBITDA. Nextel WIP also added a tinge of nastiness to the filing by saying it was seeking access to Nextel Partners’ books in order to investigate possible mismanagement or misconduct.
“The purposes of this demand are: (I) to evaluate management’s forecasts of the future performance of the company’s business … and the underlying factual bases and assumptions related to those forecasts in connection with possible communications to company stockholders or the acquisition of company shares and (II) to investigate mismanagement, breaches of fiduciary duty and/or misconduct,” Nextel WIP wrote in its claim.
Sprint Nextel has maintained that a portion of Nextel Partners’ nearly 40-percent stock-price increase since December is related to Sprint Corp.’s acquisition of Nextel Communications Inc., which closed in early August. Nextel Partners claimed the stock-price increase is due to its strong operational performance during the past several quarters.
Nextel Partners shook off Nextel WIP’s latest lawsuit as it has earlier legal claims brought by its network partner.
“We believe the lawsuit is groundless,” Nextel Partners noted in a SEC filing. “We believe Nextel Communications is using this lawsuit as a way to seek information in connection with the put process without following the procedures set forth in our charter. As contemplated by our charter, we will provide Nextel Communications and its appraiser with the information necessary for the put process once Nextel Communications has selected an appraiser and agreed to provide our appraiser with the information our appraiser requires from Nextel Communications in connection with the put process.”
Nextel Partners’ shareholders are set to vote Oct. 24 whether to exercise the carrier’s put option, which would require Sprint Nextel to acquire the remaining 68 percent of Nextel Partners it does not own already. If triggered, an appraisal process will determine the fair market value of Nextel Partners and is expected to be completed by early February.
The lawsuit filed earlier this month in Delaware Chancery Court claimed 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 claims that its affiliate agreement calls for the results of the first appraisal process, which will be handled by Nextel Partners’ choice of Morgan Stanley & Co. Inc. and an appraiser selected by Sprint Nextel, to be released as soon as possible.
Nextel Partners also is asking the court to allow a third appraiser to conduct an appraisal concurrently with the first two appraisers, which would limit the influence of the initial appraisal process and whose appraisal would be used only if the valuation of the first two appraisers are more than 10 percent apart. Nextel Partners claims this would accelerate the put process by 45 days.
