Sprint Nextel buying Virgin Mobile

July 29, 2009 10:34:38 AM

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Sprint Nextel, the third largest US wireless carrier, announced Tuesday that it is buying Virgin Mobile USA in a stock deal worth some 483 million dollars.

Sprint, which already owns 13.1 percent of Virgin Mobile USA, said the acquisition will strengthen its position in the prepaid cell phone market by combining its Boost Mobile business with the Virgin Mobile brand.

The companies said that under the agreement, which has been approved by both their boards, Sprint will retire all of Virgin Mobile USA's outstanding debt, expected to be no more than 205 million dollars as of September 30.

Sprint expects to issue between 81.4 million and 104.7 million shares of common stock in exchange for all Virgin Mobile USA common stock, excluding Sprint's 13.1 percent stake, and all Virgin Mobile USA preferred stock.

"The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment," Sprint Nextel president and chief executive Dan Hesse said in a statement.

"Prepaid is growing at an unprecedented rate with consumers keenly focused on value," he said. "Virgin Mobile is an iconic brand in the marketplace that will complement our Boost Mobile brand."

The deal calls for Sprint to pay public stockholders 5.50 dollars per Virgin Mobile USA share, a premium of 31 percent over Monday's closing price on Wall Street.

The share exchange ratio will be slightly less than the 5.50 dollars for Richard Branson's Virgin Group, which owns 28.3 percent of Virgin Mobile USA. and the other large stakeholder, South Korea's SK Telecom, which owns 15.3 percent.

Sprint Nextel will be allowed to continue using the Virgin Mobile brand until the year 2021, with an option to extend its license until 2047.

Sprint shares gained 0.88 percent to close at 4.59 dollars on Wall Street on Tuesday. Virgin Mobile USA shares gained 25.42 percent to close at 5.28 dollars.