Nextel Partners Is a Phone Company Without a Brand
Marrying into a family can always bring problems, but rarely do family feuds turn nasty as fast as the dust-up between Sprint Nextel Corp. and Nextel's most successful offspring.
It's been only two months since Sprint and Nextel completed their merger, and already the new Reston-based company is embroiled in two lawsuits with Nextel Partners Inc., a firm based in Kirkland, Wash., that provides Nextel phone service in dozens of smaller markets.
The lawsuits are preliminary skirmishes for a billion-dollar battle that begins today, when Nextel Partners stockholders are expected to vote to demand that Sprint Nextel buy the 69 percent of the company that it doesn't already own.
A corporate agreement that was written when Nextel created Nextel Partners in 1998 gives Partners the right to force a buyout under certain circumstances -- including the sale of Nextel.
Once Nextel Partners shareholders invoke the mandatory buyout requirement, the question becomes, "For how much?"
That's what Sprint Nextel and Nextel Partners are fighting about. Both have hired high-price New York lawyers and investment bankers as their gladiators.
Wall Street is betting that Sprint Nextel will have to pay top dollar for Partners. Its stock has gained more than 30 percent this year and closed at $25.51 a share on Friday. At that price, Sprint Nextel would have to spend close to $5 billion to acquire Partners.
Sprint Nextel hasn't made an offer but has said in court filings that stock prices are "not a driver of valuation."
Partners said such comments are part of an "inappropriate campaign to try to lower the trading price" of its stock so Sprint Nextel can buy the business on the cheap, perhaps for as little as half what the stock is selling for.
If Sprint's view of the valuation holds up, investors who hold Partners stock will take heavy losses, at least relative to today's prices. On the other hand, more Washington area investors own shares of Sprint Nextel, which could suffer if the company pays too much for Partners.
And taking over Partners would complicate the already difficult job of combining the operations of Sprint and Nextel, whose mobile phone networks use different technologies.
The fight is the result of deals that were made long before Nextel succeeded in the cell phone business.