“Company X” puts itself in a very strategic position in attempting to snap up Virgin Mobile USA deal just a couple of moments before Sprint announced the $483 million acquisition of the prepaid carrier last July. Details of this acquisition are filed in the US SEC detailing the deal. Company X withdrew its offer only four days before Sprint and Virgin announced their deal. This raises the possibility that Sprint could have paid more in the Virgin Mobile acquisition.
Nov. 20, 2008 was the day when the first discussion on a possible combination of Sprint Nextel and Virgin Mobile. Throughout the winter the discussion continued. March 18, 2009, Virgin engaged Deutsche Bank regarding its options. Deutsche Bank representatives brought up a timeline for the possibility of “Company X” regarding a feasible deal.
The filing said, “Deutsche Bank noted that among all potential acquirers in the market Company X would be the company most interested in acquiring Virgin Mobile USA other than Sprint Nextel, based on its perceived financial strength, similar business model and past management dialogue with Virgin Mobile USA,”
In just about over a week, Keith Cowan from Sprint called Dan Schulman to express Sprint’s interest in getting Virgin Mobile. Cowan is Sprint’s VP for strategic acquisition. Schulman conveyed to Sprint that the prepaid Telco is reviewing its other options and alternatives.
Deutsche Bank reviewed the draft presentation Virgin prepared for Sprint. Virgin Mobile’s board gave the go signal to the management to reply to Sprint’s inquiry and also inquire Deutsche Bank regarding Company X’s offer.
Last April 15, Schulman from Virgin Mobile and a representative from the Bank went to Sprint headquarters in Kansas and presented a proposal. The proposal was for Sprint to acquire Virgin Mobile in a deal that values common stock at $5. After two days Virgin Mobile’s board agreed keep negotiations going with Company X and Sprint.
By May 16, the mystery company and Virgin Mobile entered into non-disclosure agreement. Two days following the agreement, May 18, Sprint made a stock for stock and non-binding, offer for Virgin Mobile with the same value of $5 per share. On top of this they also agreed to pay Virgin’s senior debt. First day of June, Company X offered $4.27 to $5.00 per share to be paid in cash. Along with this offer Company X proposed to repay all outstanding loans of Virgin Mobile.
In July, there were a series of discussions from the different camps: Company X, Sprint, Virgin Mobile and Deutsche Bank. Schulman noted that there were certain essential terms missing from the mystery company’s offer, including the following: “proposed amendments to key agreements with Virgin Mobile USA’s strategic stockholders, such as the PCS services agreement, the tax receivable agreements and the trademark license agreements,” the filing said. July was the brawl of the war. The deal was about to close.
To cut the story short, on July 24, Company X withdrew its offer. After a few days Sprint and Virgin Mobile announced the deal. Under Sprint’s proposal of $483 million offer. Stakeholders will receive shares with a price equivalent to $5.50 per Virgin Mobile share, which means 31 percent premium on Virgin’s phone closing price of $4.21 as announced before the deal announcement. By the fourth quarter of 2009 or early 2010 the transaction is expected to be completed.
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