Sprint Acquiring Virgin Mobile USA

Sprint Nextel Corporation has just announced that it is going to buy Virgin Mobile USA for approximately $483 million.

This purchase is being made to strengthen Sprint's pre-paid phone business, and neither Boost Mobile nor Virgin Mobile will be shut down. According to a statement , "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 transaction."

Dan Hesse , Sprint's president and CEO, said, "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."

Terms of the Deal
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 . 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 $483 million that Sprint is paying 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, but is expected to be no more than $205 million net of cash and cash equivalents on Sept. 30.

Under the terms of the agreement, Virgin Mobile USA stockholders will receive shares of Sprint common stock. 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.

Source: Sprint