Directors of Sprint Corp. and Nextel Communications Inc. agreed yesterday to merge the companies in a deal that would create a new wireless telecommunications giant, sources said.
Under the merger scheduled to be announced today in New York City, Sprint chief executive Gary D. Forsee would take the top post as chief executive of the combined company and would move to the corporate headquarters, which would be in Reston, according to a source close to Nextel. Nextel chief executive Timothy M. Donahue would be executive chairman.
Sprint headquarters would be the operational base of Sprint-Nextel, with corporate headquarters in Reston.
(Keith Myers -- The Kansas City Star)
Nextel executives also would fill some key positions, including chief financial officer, chief technology officer and chief of strategic planning, according to the source close to Nextel. The merged company would have an operational headquarters in Overland Park, Kan., where Sprint is based, sources said.
About 2,500 of Nextel's 18,000 employees work in the Washington area.
Spokesmen for Sprint and Nextel declined to comment. The sources who discussed the agreement spoke on condition of anonymity because the merger announcement has not yet been made. Board members of Sprint and Nextel could not be reached, declined to comment or did not return calls yesterday.
Even as the companies' boards were approving the deal, markets were following a flurry of speculation that Verizon Communications Inc., the nation's largest phone company, might make its own last-minute bid for Sprint.
A combined Sprint-Nextel would have 39 million customers, making the company the third-largest wireless firm, behind Cingular Wireless LLC and Verizon Wireless. Cingular, which acquired AT&T Wireless Services Inc. seven weeks ago, has about 47 million subscribers; Verizon Wireless has 42 million. The merged company is expected to spin off Sprint's local phone holdings in a transaction analysts said could bring in as much as $19 billion.
Sources said that under terms of the deal, which was agreed to in principle last week, Nextel shareholders would receive the equivalent, in stock and cash, of 1.3 Sprint shares for each Nextel share. The deal, which would give Sprint slightly more than 50 percent of the combined company, is valued at $36 billion.
The Sprint-Nextel merger would require approval in coming weeks by shareholders of the companies and by regulators. Sources close to regulators said last week that the deal would probably win approval. But the remaining steps before the deal is final could give a rival like Verizon time to intervene with a counter-offer.
Sprint shares rose 2.7 percent, to $25.10, yesterday after the Wall Street Journal reported that Verizon might bid for Sprint. The increase slightly bolstered the value of the Sprint-Nextel merger. Nextel shares closed unchanged yesterday at $29.99.