By David Twiddy, AP Business Writer
Thursday, October 8, 2009
KANSAS CITY, Mo. (AP) – Sprint Nextel said Wednesday it has reached a "memo of understanding" that would settle a series of shareholder lawsuits challenging its $483 million acquisition of Virgin Mobile USA.
In a regulatory filing, the Overland Park, Kan.-based company said it and Virgin were releasing additional details about the structure of the deal and the negotiations that led up to the two companies reaching an agreement.
In return, the filing said, the plaintiffs in five cases filed in New Jersey state court have agreed to withdraw their lawsuits once a judge approves the settlement and the acquisition is completed. They have also agreed to withdraw two cases filed in New Jersey federal court.
The plaintiffs in the cases had initially opposed the acquisition, saying the terms were not in the financial best interest of Virgin Mobile shareholders.
Sprint and Virgin Mobile still face a legal challenge from Sprint affiliate iPCS, whose subsidiaries have asked an Illinois state court to block the acquisition.
Schaumburg, Ill.-based iPCS claims the deal would allow Sprint to compete within iPCS' Midwestern markets in violation of an exclusivity deal.
Sprint has called the case "without merit," but the strategy worked for iPCS last year when an Illinois judge agreed Sprint's 2005 acquisition of Nextel Communications violated the exclusivity agreement and ordered Sprint to divest its Nextel-branded operations in iPCS markets.
Wednesday's filing also said for the first time that Virgin Mobile estimates the deal could create more than $100 million in administrative, sales, customer service, product development and handset subsidy savings over two years.
Virgin Mobile shareholders and federal regulators still must approve the acquisition, which calls for Sprint to pay $5.50 in stock for each Virgin Mobile share.
Sprint Nextel already owns 13.1 percent of Virgin Mobile, which uses Sprint's network to offer service and has 5.2 million subscribers.