The transaction puts an immediate stay on all pending litigations between the companies
Sprint Nextel has reached an agreement to acquire its wireless affiliate iPCS for approximately $831m, including the assumption of $405m of net debt. Sprint expects to achieve approximately $30m of synergies annually in the transaction and expects the acquisition to add free cash flow in 2010.
As part of the agreement, the two companies will seek an immediate stay of all pending litigation between them with a final resolution to become effective upon closing of the acquisition, which is expected to be completed either late in the fourth quarter of 2009 or early 2010.
iPCS, which has the exclusive rights to use the Sprint brand name in its operating territory, wanted Sprint to cease owning, operating and managing the Nextel wireless network in its service area. It had also complained that Sprint was improperly diverting advanced technologies to its competitor in violation of the affiliation agreements.
However, as a result of the agreement, Sprint will no longer be required to divest its iDEN network in certain iPCS territories and will terminate its previously announced divestiture process pending closing of the transaction.
Under the terms of the agreement, Sprint Nextel will commence a cash tender offer to acquire all of iPCS’ outstanding common shares for $24 per share. This price per share represents a 34% premium to iPCS’ closing stock price as of October 16, 2009.
Dan Hesse, CEO of Sprint Nextel, said: “Acquiring iPCS brings added value to Sprint by expanding our direct customer base, growing our direct coverage area and simplifying our business operations. Customers in iPCS territory will see a seamless transition and continue to enjoy a superb customer experience.”
Timothy Yager, president and CEO of iPCS, said: “We are very pleased to have reached this agreement with Sprint Nextel. Given the increasingly competitive landscape, we believe this is an opportune time to provide our shareholders with a liquidity event at a very attractive price.”
The acquisition is subject to customary regulatory approvals and other customary closing conditions.