A key iPCS investor said the acquisition price is far too low considering Sprint Nextel paid more for similar-sized affiliate networks.
A key investor in iPCS said it is opposed to the looming acquisition by Sprint Nextel because the $831 million deal severely undervalues iPCS.
Greywolf Capital Management has an 8.2% stake in iPCS, and it said Sprint's $24 per share offer does not reflect the fair business value of iPCS, or the value of the litigation between iPCS and Sprint. Sprint's offer represented roughly a 34% premium over iPCS' stock price, but Greywolf said an offer of $34 to $47 a share would be more in line with how much Sprint has paid for similar affiliate networks.
The move will likely not derail the deal because other major investors are supporting the acquisition, and iPCS' board of directors has unanimously recommended that shareholders agree to the deal. But the opposition may delay the completion of the deal, which Sprint wanted to close by the end of the year.
A completed iPCS acquisition would remove a number of legal hurdles for Sprint to continue to operate its iDEN network, as well as roll out WiMax services in the Midwest markets. The companies had been embroiled in contentious litigation regarding the right to offer services in Illinois, Indiana, Iowa, Michigan, Ohio, Pennsylvania, and Tennessee. In February, a court ordered Sprint to stop operating its iDEN network in the impacted markets by early 2010, but the acquisition will settle all pending legal issues.
In a related note, iPCS also said Wednesday it had settled with other shareholders who had sued in opposition of the acquisition. Terms of the deal were not disclosed.
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