Strengthens Company's Prepaid Position in Wireless Market with Iconic Consumer Brand
Public Shareholders to Receive $5.50 per Share
OVERLAND PARK, Kan. & WARREN, N.J.--(BUSINESS WIRE)--Jul. 28, 2009--
Sprint Nextel Corporation (NYSE:S) and Virgin Mobile USA, Inc.,
(NYSE:VM) announced today that their boards of directors have approved a
definitive agreement for Sprint to acquire Virgin Mobile USA for a total
equity value of approximately $483 million, which includes the value of
Sprint’s current 13.1% fully diluted ownership interest in Virgin Mobile
USA. In addition, at closing Sprint will retire all of Virgin Mobile
USA’s outstanding debt, which is $248 million net of cash and cash
equivalents as of March 31, 2009, but is expected to be no more than
$205 million net of cash and cash equivalents on Sept. 30, 2009.
This acquisition will strengthen Sprint’s position in the growing
prepaid segment by bringing together under one umbrella the iconic
Virgin Mobile brand with Sprint’s successful Boost Mobile business.
These complementary prepaid brands, each with a distinctive offer, style
and appeal to different customer demographics, will continue to serve
existing and prospective customers following the completion of the
Following the closing of the transaction, Sprint’s prepaid business will
be led by Dan Schulman, current Virgin Mobile USA chief executive
officer, who will report directly to Dan Hesse, Sprint Nextel president
and chief executive officer. Bringing exceptional telecom leadership
credentials to Sprint, Schulman will be responsible for the business
strategy and growth of the prepaid segment. Matt Carter will continue to
lead Boost Mobile and will report to Schulman.
“The acquisition of Virgin Mobile USA positions Sprint for even greater
success in the prepaid wireless segment,” said Hesse. “Prepaid is
growing at an unprecedented rate with consumers keenly focused on value.
Virgin Mobile is an iconic brand in the marketplace that will complement
our Boost Mobile brand.”
“I have known Dan Schulman for many years, and I feel very fortunate
that a leader with Dan’s talents is joining Sprint to take us to even
greater heights in prepaid,” added Hesse.
“Virgin Mobile USA redefined the U.S. prepaid segment when we launched
seven years ago,” said Schulman. “Sprint is committed to growing its
prepaid business and this transaction will provide us with the resources
and opportunities to compete more aggressively, and strengthen our
position in prepaid.”
Strengthens Sprint’s position in the fast growing prepaid segment.
Enhances cross selling of full suite of Sprint products and services
across a larger target audience.
Free cash flow accretive for Sprint before synergies.
Synergies to be derived from general and administrative reductions,
operational efficiencies, and streamlined distribution.
Sprint gains deeper managerial talent with additional expertise in the
Terms of the Transaction
Under the terms of the agreement, Virgin Mobile USA stockholders will
receive shares of common stock of Sprint based on the exchange ratios
described in more detail below, and cash in lieu of fractional shares.
Virgin Mobile USA Public Stockholders:
Each public stockholder, holding in aggregate approximately 39.7 million
shares on a fully diluted basis or 43.3% ownership, will receive Sprint
shares having a 10-day average closing price equivalent to $5.50 per
Virgin Mobile USA share, subject to the collar referenced below.
The exchange ratio for public stockholders will be based on Sprint’s
10-day average closing share price ending two trading days prior to
The exchange ratio will be subject to a collar such that in no event
will the exchange ratio be lower than 1.0630 or higher than 1.3668.
The Virgin Group:
The exchange ratio for the Virgin Group will in all circumstances be
equal to 93.09% of the exchange ratio for the public stockholders
equating generally to $5.12 per Virgin Mobile USA share for common
stock owned by the Virgin Group (including shares into which preferred
stock held by it is convertible.)
Preferred shares owned by Virgin Group will be converted into common
stock based on the Virgin Group exchange ratio at a conversion price
Virgin Group owns approximately 26.0 million shares on a fully diluted
basis or 28.3% ownership, of Virgin Mobile USA.
The exchange ratio for the SK Telecom will in all circumstances be
equal to 89.84% of the exchange ratio for the public stockholders,
equating generally to $4.94 per Virgin Mobile USA share for common
stock owned by SK Telecom (including shares into which preferred stock
held by it is convertible.)
Preferred shares owned by SK Telecom will be converted into common
stock based on the SK Telecom exchange ratio at a conversion price of
SK Telecom owns approximately 14.0 million shares on a fully diluted
basis or 15.3% ownership, of Virgin Mobile USA.
Based on the terms of the agreement, Sprint currently expects to issue
between 81.4 million and 104.7 million shares of its common stock in
exchange for all Virgin Mobile USA common stock, excluding Sprint’s
13.1% stake, and all Virgin Mobile USA preferred stock.
Following the closing of the transaction, Virgin Mobile USA will
continue to license the Virgin Mobile USA brand from the Virgin Group
under the terms of an amended and restated Trademark License Agreement.
Sprint will pay $12.7 million for the initial term, which will continue
through the end of 2021. The agreement contains several renewal
provisions that will allow Virgin Mobile USA to extend the term until
Sprint will pay Virgin Group approximately $50 million at closing as
payment in full for net operating losses available to be utilized by
Virgin Mobile USA in the future under the Tax Receivable Agreement.
All of Virgin Mobile USA’s outstanding debt will be retired at the
closing of the transaction including amounts due under the Senior
Secured Credit Facility and the Related Party Subordinated Secured
Revolving Credit Agreements.
The payments at the closing of the transaction for the Trademark License
Agreement, the Tax Receivable Agreement and Virgin Mobile USA’s
subordinated debt will be made either in cash or stock, at Sprint’s
The transaction is subject to various closing conditions, including the
approval of the transaction agreement by Virgin Mobile USA’s
stockholders, the receipt of applicable regulatory approvals, and other
customary closing conditions. The Virgin Group and SK Telecom have
agreed to vote a portion of the Virgin Mobile USA voting shares owned by
them that, when aggregated with the voting shares owned by Sprint,
comprise approximately 40% of the outstanding voting power. The
transaction is expected to be completed in the fourth quarter of 2009 or
in early 2010.
Sprint was advised by Wells Fargo Securities and King & Spalding.
Deutsche Bank Securities Inc., Colonnade Advisors LLC and Foros Advisors
LLC are acting as financial advisors to an independent special committee
of the Board of Directors of Virgin Mobile and Deutsche Bank Securities
Inc. also has provided a fairness opinion to the committee. Virgin
Mobile USA was also advised by Simpson Thacher & Bartlett LLP.
About Sprint Nextel
Sprint Nextel offers a comprehensive range of wireless and wireline
communications services bringing the freedom of mobility to consumers,
businesses and government users. Sprint Nextel is widely recognized for
developing, engineering and deploying innovative technologies, including
two wireless networks serving more than 49 million customers at the end
of the fourth quarter 2008; industry-leading mobile data services;
instant national and international push-to-talk capabilities; and a
global Tier 1 Internet backbone. For more information, visit www.sprint.com.
About Virgin Mobile
Virgin Mobile USA, Inc. [NYSE:VM], through its operating company Virgin
Mobile USA, L.P., offers millions of customers control, flexibility and
choice through Virgin Mobile's Plans Without Annual Contracts. Its full
slate of smart, stylish and affordable handsets are available at
approximately 40,000 top retailers nationwide and online at http://www.virginmobileusa.com/,
with Top-Up cards available at almost 150,000 locations.
This press release includes forward-looking statements regarding the
proposed acquisition and related transactions that are not historical or
current facts and deal with potential future circumstances and
developments, in particular information regarding the rate of growth in
the prepaid wireless segment, expected synergies from the acquisition,
and whether and when the transactions contemplated by the transaction
agreement will be consummated. Forward-looking statements are qualified
by the inherent risk and uncertainties surrounding future expectations
generally and may materially differ from actual future experience. Risks
and uncertainties that could affect forward-looking statements include:
the failure to realize synergies as a result of operational
efficiencies, streamlined distribution and general and administrative
reductions in the timeframe expected or at all; unexpected costs or
liabilities; the result of the review of the proposed transaction by
various regulatory agencies, and any conditions imposed in connection
with the consummation of the transaction; approval of the transaction
agreement by the stockholders of Virgin Mobile USA and satisfaction of
various other conditions to the closing of the transaction contemplated
by the transaction agreement; and the risks that are described from time
to time in Sprint’s and Virgin Mobile USA’s respective reports filed
with the Securities and Exchange Commission (SEC), including the annual
report on Form 10-K for the year ended December 31, 2008 and quarterly
report on Form 10-Q for the quarter ended March 31, 2009 of each of
Sprint and Virgin Mobile USA. This press release speaks only as of its
date, and Sprint and Virgin Mobile USA disclaim any duty to update the
Important Additional Information will be Filed with the SEC
In connection with the proposed transaction, Sprint will file a
registration statement on Form S-4 with the SEC. VIRGIN MOBILE USA
STOCKHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE,
INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE
REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE TRANSACTION. The final proxy statement/prospectus will be
mailed to stockholders of Virgin Mobile USA. Investors and security
holders will be able to obtain the documents free of charge at the SEC’s
web site, www.sec.gov,
or by directing a request to Virgin Mobile USA Investor Relations at email@example.com
or 908-607-4108. In addition, investors and security holders may access
copies of the documents filed with the SEC by Virgin Mobile USA on its
web site at www.virginmobileusa.com,
when they become available.
Participants in Solicitation
Sprint, Virgin Mobile USA and their respective directors and executive
officers and other members of management and employees may be deemed to
be participants in the solicitation of proxies in respect of the
transaction. Information concerning Sprint’s participants is set forth
in the proxy statement dated March 30, 2009 for Sprint’s 2009 annual
meeting of shareholders as filed with the SEC on Schedule 14A.
Information concerning Virgin Mobile USA’s participants is set forth in
the proxy statement dated April 7, 2009 for Virgin Mobile USA’s 2009
annual meeting of stockholders as filed with the SEC on Schedule 14A.
Additional information regarding the interests of participants of Sprint
and Virgin Mobile USA in the solicitation of proxies in respect of the
proposed transaction will be included in the registration statement and
proxy statement/prospectus contained therein, to be filed with the SEC.
Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6016594&lang=en
Source: Sprint Nextel Corporation and Virgin Mobile USA, Inc.
Sprint Nextel Corporation
Mobile USA, Inc.
Jayne Wallace, 908-607-4014
Sprint Nextel Corporation
Mobile USA, Inc.
Erica Bolton, 908-607-4108