Sprint-Nextel and Nextel partners must give appraisal #'s

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Sprint, Nextel Partners Must Reveal Appraisal Numbers

WILMINGTON, Del. -(Dow Jones)- A Delaware judge Friday said Sprint Nextel Corp. and Nextel Partners Inc. must reveal the numbers their appraisers come up with in a duel over how much Sprint must pay for the 68% of Nextel Partners that it does not own.

Those numbers are due out Dec. 28 - 45 days from the start of an appraisal process triggered when Nextel Partners shareholders voted to force Sprint to buy out their shares in the one-time Nextel affiliate.

Friday's ruling from Vice Chancellor Stephen Lamb of Delaware's Court of Chancery was a victory for Nextel Partners, which contested a request from Sprint Nextel to have the appraisal numbers sealed.

The disclosure order was one of a series of rulings from Lamb at the conclusion of a two-day hearing on a dispute over the rules that will govern the process by which Nextel Partners shareholders will learn what their holdings are worth.

The combination of Sprint and Nextel triggered a put right at Nextel Partners, whose shareholders voted last month to demand Sprint Nextel buy them out at a price to be set by appraisers.

The clock started ticking on the appraisal process Nov. 13, when Sprint Nextel hired Lazard Ltd. as its appraiser.

Nextel Partners turned to Morgan Stanley to set a value on its business.

Appraisal procedures call for Lazard and Morgan Stanley to exchange preliminary figures for the fair market value of the Nextel Partners shares within 30 days of the start of the process.

Once the investment bankers have shared preliminary figures, they have another 15 days to negotiate differences with each other.

If the numbers each side reaches at the conclusion of that 15-day period are within 10% of each other, the two figures will be averaged to produce the price Sprint Nextel will pay.

If there is more than 10% difference between the numbers from bankers for the two sides, a third appraiser will be called in to resolve the differences.

Sprint Nextel wanted the reports of the first two appraisers to be kept secret because a provision in the appraisal process barred the first two appraisers from tipping their hands to the third appraiser.

Lamb Friday said the danger the third appraiser would be swayed by knowing what numbers the first two appraisers came up with was minimal.

But there was a great danger the valuations would leak, tainting a stock market that is entitled to material information about the prices expected to set the high and low ranges for the price to be paid for Nextel Partners, the judge said.

"Do you think it makes sense for the market to trade for six weeks or more not knowing that price?" Lamb asked a lawyer for Sprint Nextel.

"I think that's just amazing."

Besides agreeing with Nextel Partners that the appraisal reports need to be made public, Lamb also sided with the Kirkland, Wash.-based company on the issue of how the court should interpret key phrases in the documents that spell out how the appraisal should be conducted.

The judge said he would leave it to the investment bankers to interpret such phrases as "most recent unaffected public market stock price" in appraising Nextel Partners.

Sprint Nextel had asked the judge to require the investment bankers to pick an actual Nextel Partners stock price from a time before takeovers began bumping up prices for wireless companies.

Merger speculation fueled an unwarranted rise in Nextel Partners' stock price, Sprint Nextel said, one that could taint the appraisals.

Paul Taubman, the Morgan Stanley banker who will lead the appraisal for Nextel Partners, testified that the unaffected stock price analysis would be a complex one.

It would also, Taubman said, be one where uncertainty about the outcome of the appraisal process, including the effect of public comments by Sprint about the worth of Nextel Partners, would weigh into his calculations of "unaffected" stock price.

Such debates, the judge said Friday, are for the appraisers, not for the court.

Lamb turned down a request from Nextel Partners to speed the appointment of the third appraiser.

But most of his decisions went the way Nextel Partners was pushing him to rule on an appraisal process that, the judge acknowledged, is weighted toward the smaller company.

"The way this thing is written, it's really quite favorable to (Nextel) Partners," Lamb commented.

Leigh Horner, spokeswoman for Sprint Nextel, said the company asked Lamb for clarity on rules to govern the appraisal, and that's what it got.

"We believe that the trial has really served its purpose," she told Dow Jones Newswires.

Marc Wolinsky, attorney for Nextel Partners, said in closing arguments Friday that Sprint Nextel picked a court fight for tactical reasons.

"This case was brought to inject uncertainty, delay and confusion into the process," Wolinsky said. "That's why this case was brought."