Nextel Partners Holders Force A Takeover By Sprint

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Nextel Partners Inc. shareholders approved a put option Monday that forces Sprint Nextel Corp. to acquire the affiliate. Of the 85% of the shares that voted, 99.9% favored the buyout, as shareholders decided to go with Nextel Partners’ recommendation to exercise the option. Under the agreement, Sprint must buy the 68% stake of Nextel Partners it doesn’t already own. While the two parties have engaged in a battle over the value of Nextel Partners, going so far as to launch multiple lawsuits against each other, the approval was widely anticipated.

“We are pleased with the unprecedented backing of our shareholders who have voted virtually unanimously to exercise the put right, in agreement with the recommendation of the special committee,” Nextel Partners Chairman and Chief Executive John Chapple said in a press release Monday.

Nextel Partners has a market capitalization of roughly $7 billion, and the option forces Sprint to acquire the affiliate at a premium. Sprint has quibbled over the method of determining the exact value, and has gone to court for clarification over the process. Neither side has come out with an exact figure for the value of the company.

Now that the option has been approved, Sprint and Nextel Partners will each hire an appraiser to determine the value of the company in the next 20 days. If the values are more than 10% apart, a third appraiser will be brought in to resolve the difference within 110 days.

Nextel Partners, Kirkland, Wash., acts as an affiliate for Nextel, selling Nextel phones and services under an exclusive agreement. But the merger of Nextel with Sprint automatically triggered the option. Nextel Partners would no longer have an exclusive agreement if Sprint stores in its region could sell Nextel services. The dispute is similar to one Sprint has with its own affiliates - it has acquired three of 10, and is working to resolve the issues with the remaining ones.

Nextel Partners’ case was helped by the company’s early release of third-quarter results. The affiliate added 107,200 net new subscribers, bringing its total base to 1.9 million. Revenue, meanwhile, rose 32% to $445.2 million. Analysts were extremely bullish about the figures.

In a note, Robert W. Baird analyst William Power believes Nextel Partners will be bought out at $31 a share, accounting for its stock price and the expected premium. The analyst doesn’t have a conflict of interest to report.

Sprint recently traded at $23.12, up 12 cents, or 0.5%, on volume of 6.5 million shares. Average daily volume is 11.4 million shares.

Nextel Partners recently traded at $25.55, up 4 cents, or 0.2%, on volume of 811,050 shares. Average daily volume is 2.4 million shares.

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