Sprint Nextel Corporation and Virgin Mobile USA, Inc. 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 transaction.
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 prepaid segment.
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.