Sprint-Nextel Merger

Cambridge Finance Partners assisted counsel for Sprint-Nextel in a matter related to a contractual obligation to acquire Nextel Partners. The purchase obligation was triggered by the Sprint-Nextel merger, and at issue was the purchase price for shares of Nextel Partners not already owned by Sprint-Nextel. While publicly traded, Nextel Partners’ share price was affected by a price-markup provisions of an existing purchase agreement as well as by expectations of acquisition. Cambridge Finance Partners provided event study analysis related to the share price of Nextel Partners and assisted counsel with determination of the impact of expectations of acquisition and the existing purchase agreement on share price.

As reported on October 24, 2005 in the Wall Street Journal:

Shareholders of Nextel Partners Inc. are scheduled to vote today on whether to force Sprint Nextel Corp. to spend billions of dollars to buy them out, as their charter permits.

Nextel Partners management has argued in favor of exercising the buyout right, known as a put option. Nextel Partners is a wireless-phone company based in Kirkland, Wash., that uses Nextel’s brand and technology to serve nearly two million customers in small cities and towns. It is an affiliate of Sprint Nextel and has the right to make the larger company buy the 68.6% of Nextel Partners that it doesn’t already own. Sprint Nextel, based in Reston, Va., is the third-largest wireless company in the U.S.

Nextel Partners’ put option was triggered by the $35 billion merger of Sprint and Nextel, which closed in August. Nextel Partners and Sprint Nextel have been feuding over the price.

Nextel Partners has a market capitalization of nearly $7 billion, and its charter calls for it to be acquired at a premium. Sprint has claimed that Nextel Partners’ share price has risen so much in anticipation of the takeover that it already includes a substantial premium. Neither side has named a dollar figure that it believes is appropriate.