Sprint Nextel to buy affiliate

0 Comments | Deseret News (Salt Lake City), Dec 21, 2005

KANSAS CITY, Mo. (AP) -- Sprint Nextel Corp. said Tuesday it would buy outstanding shares of Nextel Partners Inc. in a deal valued at $6.5 billion, or $28.50 per share, settling a 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 monthlong 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.

Lazard Ltd., which was hired by Sprint Nextel, put the value of 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.

Analyst Todd Rethemeier of SurTerre Research/Soleil Securities said he thought the price was "a ridiculously high valuation" at 13 times earnings before interest, taxes, depreciation and amortization.

"Not to take anything away from Nextel Partners, they are a very well run company with good assets," Rethemeier said. "But at the end of the day, it seems way out of line with where the rest of the industry is trading and historical prices."