Sprint Finally Acquires iPCS (S, IPCS)

Sprint Nextel Corp. (NYSE: S) has finally figured a way to cure its affiliate lawsuits.  The wireless operator is acquiring iPCS, Inc. (NASDAQ: IPCS) in a merger valued at approximately $831 million, including the assumption of $405 million of net debt.  Sprint Nextel will commence a cash tender offer to acquire all iPCS common shares outstanding at $24.00 per share, what looks to be a 34% premium.  Our take on this one is that it is about time.

Sprint will add more than 700,000 PCS wireless users and 270,000 wholesale customers to become Sprint direct subscribers.  It also extends its direct service territory to an additional 12.6 million people.  As part of the deal, Sprint noted that it will divest the iDEN network assets in certain Midwestern states pending this transaction’s close.

This transaction value represents 6.4-times projected 2010 Adjusted Earnings Before Income, Taxes, and Depreciation. Sprint noted that it expects to achieve approximately $30 million of synergies annually in the transaction and expects the transaction to be free cash flow accretive to Sprint in 2010.

iPCS has been suing Sprint for so long after Sprint spent part of the decade rolling up effectively all of its large affiliates.  This will be the end of a very long saga.  In addition to buying the assets, Sprint is effectively also buying out any future lawsuit liabilities from this affiliate.

JON C. OGG
OCTOBER 19, 2009