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Sprint Nextel Corp. has tied up the biggest loose end remaining from the merger that created the telecom giant earlier this year, settling its litigation with a Nextel affiliate. Public shareholders of the affiliate, Nextel Partners Inc., hold rights entitling them to sell their shares to Sprint Nextel, but the parties had been unable to agree on price. Tuesday the company announced it will pay $6.5 billion, or $28.50 a share, to acquire the 62 percent of the affiliate it doesn’t already own. The price splits the difference on the valuations placed on Partners by two investment banks. The deal is the latest and largest in a string of deals where Sprint Nextel has bought out service-providing affiliates. Before Tuesday’s announcement, all of the targets had been connected with Sprint, which completed its merger with Nextel in August. Nextel’s partnership agreement with Partners, its only affiliate, provided that the latter’s public shareholders could force the former to buy them out upon the sale of Nextel. Since Sprint and Nextel announced their merger last December, market watchers thought Partners shareholders would opt for such a buyout, as they did. The vote put into play a valuation provision in the partnership agreement under which both Partners and Nextel’s successor would pick an investment bank to value Partners. If those valuations were within 10 percent of one another, Partners shareholders would receive the average; if the spread were greater, a third bank’s valuation of the target would have been decisive. The tiebreaker wasn’t necessary. Partners’s banker Morgan Stanley opined that the fair market value of its client’s equity is $29.75 per share, while Sprint Nextel’s chosen appraiser, Lazard, determined the target’s fair market value to be $27.25 per share. Christopher C. King, an analyst at Stifel Nicolaus Telecom Equity Research, called the valuation “rich” but “not outside the range of our expectations.” The buyer used Goldman Sachs & Co. and J.P. Morgan Securities Inc. and law firm Jones Day, while Partners turned to Evercore Partners Inc. in addition to Morgan Stanley and tapped Wachtell, Lipton, Rosen & Katz for legal advice. The law firms represented their clients in litigation over the interpretation of the agreement before Vice Chancellor Stephen Lamb of the Delaware Court of Chancery, a case mooted by Tuesday’s announcement. The companies hope to close the deal in the second quarter of 2006. Copyright �2005 TDD, LLC. All rights reserved.

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