UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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NEXTEL PARTNERS, INC.'S DEFINITIVE ADDITIONAL MATERIAL
On October 7, 2005, Nextel Communications, Inc. and its subsidiary,
Nextel WIP Corp., filed a lawsuit against Nextel Partners in Delaware Chancery
Court. The lawsuit seeks to prohibit Nextel Partners from disclosing to its
public shareholders the valuation reports of the first two appraisers to be
appointed under Nextel Partners' put process. The suit also seeks to require
Nextel Partners to provide Nextel and its appraiser with certain financial
information, and asks the court to concur with certain positions that Nextel has
previously taken with respect to the definition of fair market value under
Nextel Partners' charter, positions that Nextel Partners believes are wrong.
Nextel Communications' complaint is filed herewith as Exhibit 99.1.
On October 10, 2005, Nextel Partners issued a press release responding
to the lawsuit and stating, among other things, that Nextel Partners believes
the lawsuit has no merit. The press release is filed herewith as Exhibit 99.2.
While Nextel Partners believes the lawsuit is without merit, if the court were
to issue an order prohibiting the disclosure of the valuation reports of the
first two appraisers appointed under Nextel Partners' put process, Nextel
Partners would comply with such order and would not disclose such reports for so
long as such order was in place.
EXHIBITS INDEX
99.1 Complaint in Delaware Chancery Court Action
99.2 Nextel Partners' Press Release, dated October 10, 2005
EXHIBIT 99.1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
NEXTEL COMMUNICATIONS, INC., a Delaware )
corporation, and NEXTEL WIP CORP., a )
Delaware corporation, )
) Case No. _____________
Plaintiffs, )
)
v. )
)
NEXTEL PARTNERS, C., a Delaware )
corporation, )
)
Defendant. )
)
COMPLAINT FOR DECLARATORY JUDGMENT
Plaintiffs Nextel Communications, Inc. ("Nextel Communications") and Nextel
WIP Corp. ("NWIP", and together with Nextel Communications, "Nextel"), for their
complaint against defendant Nextel Partners, Inc. ("Partners"), allege as
follows:
THE PARTIES
1. Nextel Communications is a Delaware corporation and a wholly owned
subsidiary of Sprint Nextel Corporation ("Sprint Nextel"). NWIP, also a Delaware
corporation, is a wholly owned subsidiary of Nextel Communications.
2. Partners is a Delaware corporation. Based on recent market prices,
Partners' total market capitalization is about $6.8 billion. Publicly traded
Class A common stock ("Class A stock") represents about 68% of Partners' common
stock. Class B common stock, all of which is owned by NWIP, represents the
balance. Nextel therefore owns about 32% of Partners.
3. NWIP is the obligor under a "put" provision for the Class A stock
contained in Partners' Certificate of Incorporation (the "charter"). The put, if
exercised, would require NWIP
to purchase the Class A stock at a price determined by an appraisal process.
Nextel Communications has agreed to perform, or cause NWIP to perform, NWIP's
obligations concerning the put.
NATURE OF THE ACTION
4. This is an action for a declaratory judgment under 10 DEL. C. ss.ss.
6501, ET SEQ.
5. Nextel seeks the Court's immediate intervention to address fundamental
disputes and misinterpretations that have arisen with respect to provisions of
Partners' charter that govern the put process by which Nextel will acquire
Partners' Class A stock under the charter:
(a) Two of the disputes involve basic issues with respect to the
valuation process established by the charter. Nextel seeks to have this
Court declare that the charter requires a level playing field between the
two appraisers appointed separately by each of the parties and further
declare that the charter requires that the third appraiser whose valuation
may ultimately determine the put price must arrive at that valuation
without being informed of the values determined by the first two
appraisers. These features form the core of the charter's valuation
process, but are in jeopardy as a result of Partners' recent actions,
positions, and statements.
(b) The remaining disputes involve important aspects of the "fair
market value" ("FMV") valuation measure by which the put price is to be
determined under the charter. Nextel seeks to have this Court declare that
novel and unsupportable interpretations of certain fundamental components
of the charter's definition of FMV put forward publicly by Partners do not
comport with common definitions and understandings and construe those
components of the definition in accordance with common definitions and
understandings so that all three appraisers will perform their appraisals
based on those common definitions and understandings and not be influenced
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in their appraisals by Partners' proffered interpretations.
The declarations that Nextel seeks are necessary to preserve the fairness,
objectivity, and integrity of the put process governing Nextel's purchase of
Partners' Class A stock.
6. Section 5.7(b) of the charter requires that Partners' FMV (which in turn
will be used to arrive at an appropriate per share put price) be determined by
individuals or entities who will function as appraisers and who will operate on
a level playing field -- commencing their appraisals at or about the same time,
having access to the same valuation information, and working under the same or
similar tight time constraints. Partners has so far prevented this from
happening by, among other things, designating its appraiser prematurely, giving
its appraiser early access to nonpublic valuation information and not making the
same information available to Nextel, promising its appraiser a potentially
enormous contingent fee based on the amount of the put price, and obtaining from
its appraiser at least a preliminary indication of a valuation range before the
designated start date for the valuation process. Because a level playing field
for the first two appraisers is a basic feature of the appraisal process
established by the charter, the balance required by the charter must be restored
before the clock begins to run on the work of the first two appraisers.
7. Section 5.7(c) of the charter requires that two appraisers appointed
separately by the parties will operate in a process that also involves a third
appraiser, appointed by the first two appraisers, who is to work on a "blind"
basis -- I.E., without knowledge of the conclusions reached, or the related
reasoning expressed by, either of the first two appraisers. Under the
charter, this third appraiser's valuation may ultimately determine the put
price. Partners apparently has concluded that, rather than attempting to keep
the determinations of the first two appraisers from the third appraiser,
Partners instead should take steps that will assure that the
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third appraiser does not operate on a blind basis. It has announced its plan to
prevent a blind third appraisal by disclosing and publicizing the FMV
determinations and related reports of the first two appraisers in a way that is
calculated to become known to the third appraiser. This will effectively prevent
the third appraiser from determining the put price without knowledge of the
prices set, and the related reasoning expressed by, the first two appraisers and
introduce those items as factors that could influence the third appraiser's
analysis and conclusions. This plan directly contradicts the requirements of the
charter applicable here.
8. Section 5.7(a) of the charter requires the appraisers to determine the
FMV based on certain terms and valuation factors that have common,
well-understood meanings. Partners has nevertheless set forth publicly novel and
unsupportable interpretations of certain of those terms and factors that
conflict with their common and usual meanings. Unless Partners'
misinterpretations are corrected by this Court, one or more of the three
appraisers may apply Partners' incorrect interpretations of the FMV valuation
measure in making their valuation determinations and do so in ways that will be
difficult if not impossible to correct through the procedures set forth in the
charter.
9. Partners' actions, positions, and statements are fundamentally
inconsistent with the requirements of the charter and with the appraisal process
by which the parties agreed to determine the put price. Nextel therefore seeks
to have this Court render a declaratory judgment that will restore the fairness,
objectivity, and integrity of the put process.
INTRODUCTION
A. THE SPRINT-NEXTEL MERGER GIVES RISE TO A PUT RIGHT UNDER PARTNERS' CHARTER
10. From Partners' inception as a closely held start-up company, its
charter, attached as Exhibit A, has included a provision that permits Class A
common stockholders (the "Class A stockholders") to exercise a put right in
certain circumstances, and thereby to require Nextel to
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purchase their stock. One such circumstance is a "Nextel Sale," which includes a
merger or other business combination by which Nextel is subsumed into another
corporation. It has long been known in the investment and financial community,
and to Partners and its stockholders, that a Nextel Sale could trigger the put,
and thereby effect a sale of Partners to Nextel.
11. The opportunity to exercise the put was provided by the closing of the
merger of a subsidiary of Sprint Corporation ("Sprint") and the predecessor of
Nextel Communications on August 12, 2005. Because Nextel's stockholders received
slightly less than 50% of the combined company's stock, the merger amounted to a
Nextel Sale for purposes of the charter even though the transaction was a
so-called merger of equals. If the put is exercised, it would require Nextel to
purchase all of the outstanding shares of Class A stock. Nextel must purchase
the Class A stock (and all the holders must sell that stock) if the holders of a
majority of the stock vote to exercise the put. A meeting of Partners' Class A
stockholders is scheduled for October 24, 2005 to vote on whether to exercise
the put or postpone the meeting.
12. The Sprint-Nextel merger was driven in substantial part by Nextel's
view that merging with Sprint was desirable in light of the existing and
evolving competitive and technological environment in the wireless industry. The
merger was formally announced on December 15, 2004. Rumors about the merger were
first published in the WALL STREET JOURNAL on December 9, 2004. Securities
analysts covering Partners immediately picked up on those rumors and stated that
a Sprint-Nextel merger would be positive for Partners and its Class A
stockholders because of the put. Since then, the put process has been emphasized
by most of the securities analysts covering Partners, who have tended to assign
significant additional value to Partners' Class A stock price due to their
perceived understanding of the put process. The trading price of Partners' Class
A stock has been affected by the possibility of a put exercise after
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the Sprint-Nextel merger or some other form of Nextel Sale transaction since
well before December 9, 2004.
13. More broadly, the trading price of Partners' Class A stock has been
affected by the pervasive consolidation in the wireless telecommunications
industry and rumors of Nextel's involvement in that consolidation. For example,
during the period leading up to the announced sale of AT&T Wireless to Cingular
Wireless in early 2004, there was speculation on Wall Street that more
consolidation in the wireless industry was a given and that, since Nextel was
the only remaining pure-play national wireless company, Nextel might be sold.
Since well before the announcement of the Sprint-Nextel merger, speculation has
been rampant concerning the potential valuation of Partners' Class A stock in
the put process if Nextel were to engage in a significant merger or acquisition
transaction. Takeover speculation in the wireless industry and the announcement
of the Sprint-Nextel merger have had a significant effect on Partners' stock
price.
14. Partners' stock price responded very favorably to the probability of
the Sprint-Nextel merger because the closing of the merger entitles Class A
stockholders to vote to exercise the put. Partners has conducted a carefully
orchestrated campaign to create an atmosphere in which the put process might
produce a valuation of Partners far above any reasonable range that would
otherwise obtain. This campaign is well under way and is now reaching its
culmination.
15. On June 23, 2005, Partners announced that a committee of Partners'
board of directors had decided to recommend that Partners' Class A stockholders
vote to exercise the put, notwithstanding that the Sprint-Nextel merger had not
even closed at that time.
16. On or about August 12, 2005, Partners advised its Class A stockholders
of the closing of the Sprint-Nextel merger. This notice triggered the right of
Class A stockholders
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holding 20% or more of the Class A stock to require Partners to convene a
special meeting to vote on exercising the put. By August 24, 2005, Partners
announced that it had received requests from the holders of more than 20% of its
Class A stock to convene a special meeting.
17. On or about September 22, 2005, Partners began mailing a proxy
statement (the "proxy statement") advising Class A stockholders that a special
meeting would be held on October 24, 2005 for a vote on whether to exercise the
put or postpone the special meeting. It is widely expected that the put will be
exercised.
18. If the Class A stockholders vote to exercise the put, Nextel will be
required to purchase the Class A stock based on a FMV for Partners that is to be
determined under an appraisal process, in accordance with related assumptions,
standards, and other factors, as set forth in Article V of the charter. Once the
put is exercised, no further stockholder or board action is required.
19. Nextel consistently has acknowledged its obligation to purchase the
Class A stock under the charter's put provisions. Nextel consistently has
insisted that the charter's put provisions be applied and interpreted in
accordance with their plain and accepted meanings.
20. Time is of the essence. Accordingly, Nextel respectfully requests the
Court to resolve promptly fundamental disputes that have arisen with respect to
the put as a result of Partners' conduct and public positions and statements.
Absent prompt and definitive direction and corrective relief from this Court,
the fairness, objectivity, and integrity of the charter's valuation methodology
will be severely compromised and the proper operation of the put process will be
irreparably harmed.
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B. PARTNERS' CHARTER ESTABLISHES A VALUATION PROCESS, THE INTEGRITY OF WHICH
IS FUNDAMENTAL TO THE PUT RIGHT
21. The charter specifies steps for the put process and for determining
FMV, which is the basis on which Nextel would be required to purchase the Class
A stock. The appraised FMV is "final and binding" unless a post-appraisal
challenge is filed by a Class A stockholder or NWIP. Challenges are to be heard
by a tribunal, which is to uphold the FMV determination unless it is "grossly
incorrect or fraudulently obtained." If challenged by a Class A stockholder, the
appraised FMV would be subject to a maximum "ceiling" value. If challenged by
NWIP, the appraised FMV would be subject to a minimum "floor" value. These
procedures were designed to create disincentives to challenges to the FMV
determination and to produce a valuation that is "final and binding." The
structure of this valuation process places a premium on the integrity of the
process and on adherence to the charter's valuation procedures.
22. The procedures set forth in the charter are an integral part of the put
process and form the basis for the agreement that FMV determined under the put
process will be "final and binding," subject only to the challenge process set
forth in the charter. The integrity of the charter's valuation methodology is
fundamental to the parties' agreement that the put process would produce a
"final and binding" FMV.
23. It is imperative that the fairness, objectivity, and integrity of the
charter's valuation process be preserved and protected in light of, among other
things: the structure of the valuation process; Partners' actions to date and
its publicly announced plans and positions on the valuation process and
methodology; the size of the contemplated put transaction; the importance
of the outcome of the valuation process to Nextel, Sprint Nextel, the
stockholders of Sprint Nextel, and the Class A stockholders; the widespread
interest of the investment community in the FMV determination; and the "final
and binding" nature of the valuation process.
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24. Under the charter, FMV will be evaluated by a First Appraiser appointed
by Partners' board and a Second Appraiser appointed by NWIP. Section 5.7(b) of
the charter states (emphasis added):
Within 20 days AFTER NOTICE IS GIVEN of the exercise of a Put Right
. . ., the Board of Directors . . . will select and identify to NWIP a
nationally recognized investment banker or appraiser (the "First
Appraiser") and NWIP, will select and identify to the stockholders a
nationally recognized investment banker or appraiser (the "Second
Appraiser"). The date when both appraisers have been identified, is
the "Start Date." NWIP, the Corporation and the other stockholders
will (and NWIP will cause Nextel to) cooperate with any appraisers
appointed under this Section and SHARE WITH EACH SUCH APPRAISER ALL
INFORMATION RELEVANT TO A VALUATION OF THE CORPORATION. Within 30 days
of the Start Date, the First Appraiser and the Second Appraiser will
each determine its preliminary view of the Fair Market Value of the
Corporation IN ACCORDANCE WITH THE CRITERIA SET FORTH IN SECTION
5.7(A), and will consult with each other with respect to their
respective preliminary values. On or prior to the 45th day after the
Start Date, the First Appraiser and the Second Appraiser will each
render to the stockholders its written report on the Fair Market Value
of the Corporation.
The First and Second Appraisers are therefore required to operate within very
tight 30-day and 45-day deadlines; these deadlines begin to run at a Start Date
by which both the First and Second Appraisers have been appointed. Assuming that
Partners' Class A stockholders vote to exercise the put, and based on the
schedule that Partners is currently following, the Start Date will be no later
than November 13, 2005.
25. The charter provisions relating to the selection of the First and
Second Appraisers shortly after the exercise of the put and the close proximity
of those appraisers' consultation and completion deadlines to the Start Date
highlight the critical and equitable importance of ensuring that each of Nextel
and Partners, and the First and Second Appraisers selected by them, will operate
on a level playing field in meeting the strict deadlines. These provisions were
designed to ensure a rapid start and quick conclusion for the first set of
parallel appraisals, not to confer on
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one of the parties or its selected appraiser a strategic or substantive
advantage in securing a desired outcome. To preserve the intended fairness,
objectivity, and integrity of the valuation process, and to ensure that it
operated in a proper, good faith manner, neither the First nor the Second
Appraiser should be given any significant time, information, or preparation
"head start" or other advantage in conducting the respective parallel valuation
processes. In addition, the charter's fully informed "willing buyer/willing
seller" valuation standard requires that Partners provide Nextel with prompt and
wide-ranging access to the types of due diligence information typically provided
to potential acquirers in acquisition transactions of this magnitude. No
"willing buyer" should be considered to be "fully informed" by the simple
expedient of receiving a last-minute deluge of business information, including
not only historical and hard factual data, but also significant materials in the
nature of projections, plans, goals, and assumptions, from a target company. No
diligent appraiser would approach its task in good faith if it were to accept at
face value all information provided by the target company, with no meaningful
opportunity for that information to be vetted, questioned, critiqued, or
countered by a potential buyer that has been permitted a reasonable time to
review, digest, analyze, and respond to that information. The charter expressly
requires that Nextel, as well as Partners, share "all information relevant to a
valuation of [Partners]" with the appraisers, and such relevant information must
include input not only from a "fully informed willing seller" regarding its
perception of its own strengths, advantages, performance, and prospects but also
input from a "fully informed willing buyer" concerning its perception of that
seller's weaknesses and vulnerabilities, and contrary views concerning the
accuracy of or bases for the performance and projections as presented by the
seller.
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26. Partners retained Morgan Stanley & Co. Incorporated ("Morgan Stanley")
as the First Appraiser in January 2005, nine months in advance of the put
exercise that would trigger the period for appointing the appraisers under the
charter. NWIP has not yet designated the Second Appraiser, and the time for so
doing has not yet begun to run.
27. If the FMVs of the First and Second Appraisers are within a 10% range,
the FMV will be determined by averaging them. If not, the First and Second
Appraisers will name a Third Appraiser, whose FMV will either become the FMV or
will be averaged with the determination of either the First or Second Appraiser
to establish FMV under ss. 5.7(c) of the charter (emphasis added):
If the higher Fair Market Value determined under Section 5.7(b) (the
"High Value") is not more than 110% of the lower Fair Market Value
determined under Section 5.7(b) (the "Low Value"), then the Fair
Market Value will be the average of the High Value and the Low Value.
If the High Value is more than 110% of the Low Value, then, not more
than 60 days after the Start Date, the First Appraiser and the Second
Appraiser will together designate another nationally recognized
investment banker or appraiser (the "Third Appraiser"), WHO WILL NOT
BE INFORMED OF THE VALUES DETERMINED BY THE FIRST AND SECOND
APPRAISERS. The Third Appraiser will make a determination of the Fair
Market Value of the Corporation IN ACCORDANCE WITH THE CRITERIA SET
FORTH IN SECTION 5.7(A) and deliver its written report to the
stockholders (the "Third Value") not more than 30 days after the Third
Appraiser is designated. If the Third Value is within the middle one
third of the range of values between the High Value and the Low Value
(the "Mid-Range"), Fair Market Value will be the Third Value. If the
Third Value does not fall within the mid-range, the Fair Market Value
will be the average of (x) the Third Value and (y) either (i) the High
Value or (ii) the Low Value, whichever is closest to the Third Value,
provided that the Fair Market Value shall not be less than the Low
Value nor greater than the High Value.
The prospect of review and ultimate unbiased determination of value by a Third
Appraiser is a critically important part of the valuation process, intended both
to influence appropriately the determinations of the First and Second Appraisers
and, if necessary, to resolve the valuation
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issue if the First and Second Appraisers diverge by more than 10%. To preserve
the integrity of the Third Appraiser process, and to ensure that the Third
Appraiser's FMV is not affected in any way, whether directly or indirectly, by
the determinations of the First and Second Appraisers, the charter specifically
provides that the Third Appraiser "will not be informed of the values determined
by the First and Second Appraisers." The requirement that the Third Appraiser
determine FMV without knowledge of the determinations of the First and Second
Appraisers is a fundamental feature of the charter's valuation process because
it ensures that the Third Appraiser's valuation will reflect an unbiased view.
28. In determining FMV, the appraisers are to apply a definition of that
term set forth in ss. 5.7(a) of the charter, which defines "FMV" in part as:
. . . the price that would be paid for all of the Corporation Capital
Stock . . . by a willing buyer to a willing seller, in an arm's-length
transaction, as if the Corporation were a publicly traded and
non-controlled corporation and the buyer was acquiring all of such
Corporation Capital Stock of the Corporation, and assuming that the
Corporation was being sold in a manner designed to attract all
possible participants to the sales process . . . and to maximize
stockholder value . . . , with both buyer and seller in possession of
all material facts concerning the Corporation and its business. In all
cases, Fair Market Value for the Corporation will include a control
premium and there will be no minority or illiquidity discount. Fair
Market Value of the Corporation shall be determined on the assumption
that in a competitive acquisition market with Nextel and prospective
buyers other than Nextel, the Corporation would be at least as
valuable to other prospective buyers as to Nextel. Fair Market Value
shall be determined on the assumption that the Corporation is at least
as valuable as if it were a part (although separable) of Nextel, with
the valuation of the Corporation for purposes of this sentence being
derived from a valuation of Nextel consistent with the first sentence
of this paragraph but without taking into account a control premium
for Nextel (it being understood that a control premium, however, will
be applied to the Corporation). . . . If the Corporation's stock is
publicly traded, Fair Market Value will take into consideration (i)
the trading activity and history of the Corporation's stock and (ii)
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the Corporation's most recent "unaffected" public market stock price
. . . .
29. The charter contemplates that the three-appraiser valuation process, if
allowed to function as intended, will provide a certain level of constraint on
novel or unsupportable interpretations of the FMV definition or valuation
factors. Certain aspects of the FMV definition and valuation factors, however,
are based on well-established common concepts and understandings. In such cases,
the appraisers are required to apply those concepts and understandings and are
not free to write their own definitions or create their own interpretations.
Because it may be difficult or impossible to determine after the fact whether an
appraiser's FMV has been influenced by an unsupportable interpretation of the
FMV definition or valuation factors, judicial clarification before the start of
the appraisal process is essential to resolve issues as to which disputes have
arisen because of unsupportable interpretations that Partners has affirmatively
and publicly advocated. As we will discuss, that situation applies here with
respect to three important components of FMV as a result of Partners' public
assertions about the meaning of the term FMV.
C. PARTNERS' ACTIONS, POSITIONS, AND STATEMENTS THREATEN THE FAIRNESS,
OBJECTIVITY, AND INTEGRITY OF THE PUT PROCESS
30. There are fundamental disputes regarding the put that require judicial
resolution before the appraisal process commences. Partners' proxy statement,
among other things: describes actions that Partners has taken and plans to take
with respect to the put; reports that Partners retained Morgan Stanley as the
First Appraiser in January 2005 and has worked with Morgan Stanley on various
issues relating to the put since that time; discloses the existence of what
Partners calls "a preliminary equity valuation summary range" provided by Morgan
Stanley based on, among other things, nonpublic information from Partners that
has not been provided to
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Nextel; describes a contingent fee arrangement between Partners and Morgan
Stanley, in which Morgan Stanley's compensation in connection with the put
increases with the amount of the put price and under which Morgan Stanley will
be paid as much as $50 million; and sets forth Partners' views on important
aspects of the put. In so doing, the proxy statement demonstrates several
fundamental disputes between Nextel and Partners relating to the procedures
contemplated by the charter and the FMV definition, each of which requires
prompt judicial resolution to preserve the fairness, objectivity, and integrity
of the put process.
31. The fundamental disputes surrounding the put process include, but are
not limited to, the following:
(a) Partners said in its proxy statement that it intends to disclose
publicly the FMV determinations and related reports of the First and Second
Appraisers as promptly as practicable, thereby making it impossible to
select a Third Appraiser who will not be informed, directly or indirectly,
of those FMVs and the related reasoning and impossible to preserve an
environment in which the Third Appraiser determines FMV on a "blind" basis,
without knowledge of the FMVs of the First and Second Appraisers, as
required by the charter;
(b) Partners has upset the level playing field for the First and
Second Appraisers required by the charter and aggravated Nextel's concerns
over Partners' planned public disclosure of the FMVs of the First and
Second Appraisers by, among other things, retaining the First Appraiser at
least nine months before the date contemplated by the charter, providing
the First Appraiser with nonpublic "information relevant to a valuation of
the Corporation" that is not available to Nextel, not providing the same
valuation information to Nextel, receiving from the First Appraiser what
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Partners has described as a "preliminary equity valuation summary range,"
and agreeing to pay the First Appraiser a contingent fee of up to $50
million depending on the FMV determination that emerges from the put
process;
(c) Partners has asserted that the phrase "most recent 'unaffected'
public market stock price" in the charter means something other than an
actual historical stock price that pre-dates the speculation that preceded
and the announcement of the Sprint-Nextel merger, and that the "most recent
unaffected public market stock price" valuation parameter may ultimately be
ignored in determining FMV;
(d) Partners has asserted that appraisers who are directed to apply a
"willing buyer/willing seller" FMV standard may properly ignore future
operating risks to Partners arising from the changing competitive
environment in the wireless telecommunications industry, including the
advent of new, competing technologies, the evolving competitive landscape
in Partners' territories, and the evolution of roaming, based on Partners'
assertion that this is what its charter really means when it provides, as
part of a broader provision, that there will be no discount or premium due
to the fact that "only Nextel has an identical technology platform"; and
(e) Partners has asserted that it is appropriate in applying the
charter's definition of FMV to add a "control premium" to a discounted cash
flow ("DCF") valuation.
32. Nextel seeks declaratory relief on these aspects of the put process and
the definition of FMV. Nextel seeks this relief to preserve the fairness,
objectivity, and integrity of the valuation process established by the charter.
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33. There is an actual controversy between Nextel and Partners regarding
the interpretation and application of the put provisions of the charter.
THE PARTIES DISPUTE KEY ELEMENTS OF THE PUT PROCESS
AND THE METHOD FOR DETERMINING "FMV"
34. Partners' proxy statement advises Class A stockholders about issues
that are material to the exercise of the put and does so in a way that
demonstrates a number of fundamental disputes between Nextel and Partners. By
this action, Nextel seeks to have this Court resolve those disputes in order to
ensure that the valuation procedures and definitions of the charter are properly
applied in determining FMV.
A. PARTNERS' ATTEMPT TO UNDERMINE THE FAIRNESS, OBJECTIVITY, AND INTEGRITY OF
THE CRITICAL THIRD APPRAISER PROCESS
35. Subject to the challenge process, the charter provides for a "final and
binding" FMV determination by a valuation process that may ultimately depend on
the FMV determination of a Third Appraiser. The charter requires that the Third
Appraiser determine FMV in accordance with the criteria set forth in ss. 5.7(a)
and deliver a written report on value without having been informed of the values
determined by the First and Second Appraisers. Under ss. 5.7(c), the charter
expressly provides that the Third Appraiser "will not be informed of the values
determined by the First and Second Appraisers."
36. The provision of the FMV appraisal process that requires the Third
Appraiser to determine FMV without being informed of the FMVs determined by the
First and Second Appraisers is of central importance to the process. The
valuation process was explicitly designed so that the Third Appraiser would
operate on a blind basis and would make a determination of value that was not
influenced by knowledge of the FMV determinations or reports of the First and
Second Appraisers. Among other things, this ensured that the Third Appraiser
would not simply reach a compromise determination based on its knowledge of the
determinations of the
16
First and Second Appraisers or otherwise be influenced by the fact that a
particular appraiser determined a particular FMV, or by the methodology used or
reasoning stated by a particular appraiser in determining a particular FMV.
Strict enforcement of this charter provision is the only way to ensure that the
Third Appraiser's valuation is not influenced, directly or indirectly, by the
conclusions of the First and Second Appraisers.
37. The charter provides in ss. 5.7(b) that the First and Second Appraisers
will render written reports on Partners' FMV "to the stockholders." This
language, which by its terms does not require that the reports be published or
physically delivered into the hands of stockholders, was drafted when Partners
was not a publicly traded company and when it would have been possible to impose
restrictions on disclosure by the stockholders that would have been consistent
with the paramount objective of the charter that the Third Appraiser operate
without knowledge of the FMV determinations and reports of the First and Second
Appraisers. Now that Partners is a public company, disclosure of the reports of
the First and Second Appraisers to the stockholders necessarily requires
disclosure to the world and cannot be reconciled with the paramount objective of
the charter's appraisal process. As a result, the requirement that the
appraisers render written reports to the stockholders, to the extent that it
contemplates physical delivery to the stockholders, must yield to the
requirement that the Third Appraiser not be informed of the FMVs of the First
and Second Appraisers.
38. In light of the structure of the put process, there is no valid purpose
to be served in the put process by having the First and Second Appraisers
physically deliver written reports informing Partners' stockholders of the FMVs
they have determined in advance of the conclusion of the Third Appraiser's
valuation process. The Class A stockholders will have irrevocably committed
themselves to the put process at the time the reports of the First and Second
17
Appraisers are available, and knowledge of the reports of the First and Second
Appraisers will not influence any decision by the Class A stockholders relating
to the put process. Indeed, the only conceivable purposes for disclosing the
reports of the First and Second Appraisers to the Class A stockholders are to
attempt to influence the trading price of Partners' stock based on speculation
about the ultimate outcome of the valuation process and to influence the FMV
determination of the Third Appraiser. While serving no valid purpose in the put
process, making public disclosure of the FMV determinations and reports of the
First and Second Appraisers would preclude attainment of the paramount goal of
the Third Appraiser process, which is to have the Third Appraiser determine FMV
without knowledge of the First and Second Appraisers' determinations.
39. Despite the charter's requirement that the Third Appraiser operate on a
blind basis and the importance of that requirement to the fairness, objectivity,
and integrity of the valuation process, Partners committed in the proxy
statement to issuing a press release publicizing the FMVs of the First and
Second Appraisers and to filing the reports of the First and Second Appraisers
with the SEC and posting them on its website. Nothing in the charter authorizes
Partners to publicize the FMVs and reports of the First and Second Appraisers in
this way. Such publication cannot be reconciled with the requirements of ss.
5.7(c). The publicity program contemplated by Partners will inevitably lead to a
situation in which the Third Appraiser can hardly fail to be informed of the FMV
determinations and related reasoning of the First and Second Appraisers, thereby
destroying a critically important aspect of the valuation process.
40. Nextel agreed to be bound by the results of the valuation process set
forth in the charter and not by the results of an alternative process that
produces very different valuation dynamics and potentially very different
results. A valuation process in which the Third
18
Appraiser is informed of the FMV's of the First and Second Appraisers will have
very different valuation dynamics than the process required by the charter and
potentially may produce very different results.
41. This Court should therefore declare that Partners' planned publicity
program for the FMVs and reports of the First and Second Appraisers is
inconsistent with the provision of the charter requiring that the Third
Appraiser not be informed of the values determined by the First and Second
Appraisers and that, if this announced intention is implemented, it will destroy
the fairness, objectivity, and integrity of the "final and binding" appraisal
process established by the charter and thereby preclude the use of the Third
Appraiser process.
42. The Court should further declare that the reports of the First and
Second Appraisers should be delivered to Nextel and Partners' board and not to
Partners' stockholders, and the recipients of the reports should be ordered to
hold those reports in strict confidence and not to disclose the FMV
determinations or reports of the First and Second Appraisers, or the substance
thereof, unless the FMVs they determine are within 10%, in which event no Third
Appraiser would be appointed under the charter.
B. PARTNERS' ATTEMPT TO TILT THE PLAYING FIELD FOR THE FIRST AND SECOND
APPRAISERS
43. Under ss. 5.7(b) of the charter, Partners is required to "select and
identify to NWIP" the First Appraiser "[w]ithin 20 days after notice is given of
the exercise of a Put Right. . . ." NWIP must "select and identify to the
[Partners] stockholders" the Second Appraiser on the same timetable. The date on
which the First and Second Appraisers are identified is the Start Date for the
valuation process, and the First and Second Appraisers are required to determine
their preliminary views of FMV within 30 days of the Start Date. Within 45 days
of the Start Date, the First and Second Appraisers are to deliver their
respective written reports on FMV. The charter requires that the First and
Second Appraisers will operate on a level playing
19
field, with both being selected in a relatively narrow time frame after the put
is exercised and both beginning their appraisal work at the same time, working
with the same information, applying the same FMV definition and valuation
factors, and concluding their work within the same 30- and 45-day periods. To
facilitate this process, which includes very tight scheduling deadlines, each of
Partners and Nextel is required to "cooperate with any appraisers appointed
under this Section and share with each such appraiser all information relevant
to a valuation of the Corporation." The charter further requires that both
appraisers make their determinations "in accordance with the criteria set forth
in Section 5.7(a)," which criteria include the concept of a willing buyer and
willing seller "with both buyer and seller in possession of all material facts
concerning the Corporation and its business" -- a requirement that necessarily
entails disclosure by Partners to Nextel of all material valuation information
so that Nextel can inform itself and the appraisers of its views (including its
reactions and/or responses to any of the information so provided by Partners)
and of any additional information that in Nextel's view would be relevant and
material to a valuation of Partners.
44. Partners selected Morgan Stanley as the First Appraiser no later than
January 27, 2005, and publicly identified Morgan Stanley as such on or about
June 23, 2005, nine and four months, respectively, before Partners' Class A
stockholders will vote on whether to exercise the put. In the months since
Partners selected Morgan Stanley as the First Appraiser, Partners has, among
other things, provided Morgan Stanley with nonpublic valuation information not
available to Nextel and worked extensively with Morgan Stanley on issues
relating to the put. According to the proxy statement, Partners retained Morgan
Stanley in January 2005 to advise Partners on the put, to act as financial
advisor to Partners' special committee, including in connection with
consideration of whether or not to recommend a vote to
20
exercise the put, and to provide an appraisal if the put is exercised. Morgan
Stanley has made no fewer than three presentations to the special committee and
has developed what Partners refers to as a "preliminary equity valuation summary
range" based on, among other things, nonpublic information provided by Partners
that is not available to Nextel. In recommending that Class A stockholders vote
to exercise the right, the special committee has relied on Morgan Stanley's
presentations.
45. According to the proxy statement, Partners has agreed to pay Morgan
Stanley a fee -- the so-called "Appraisal Process Fee" -- of $2.5 million on the
date on which the Class A stockholders vote to exercise the put and a fee -- the
so-called "Transaction Fee" -- of up to $50 million (against which the Appraisal
Process Fee will be credited) on the consummation of the put. The Transaction
Fee will be determined based on the price per share that is to be paid by NWIP
under the put process, and the increase in the size of the fee above the minimum
fee level of $7.5 million correlates with the increase in the price per share
that is to be paid through exercise of the put. The Transaction Fee (as Partners
has generally described it and its operation) effectively constitutes a
contingent fee, providing Morgan Stanley with a higher fee for a higher
appraisal value and therefore a strong financial incentive to deliver an
appraisal that results in a higher put price. As the proxy statement
acknowledges, the Transaction Fee gives Morgan Stanley a "significant interest
. . . in the price per share that is received by Class A common stockholders in
connection with the exercise of the Put Right."
46. Partners has shared with Morgan Stanley information relevant to a
valuation of Partners that is not currently available to Nextel and that has not
been shared with Nextel or whatever nationally recognized investment banker or
appraiser will become the Second Appraiser on the schedule set forth in ss.
5.7(b) of the charter. Until the Second Appraiser and
21
Nextel are provided with all information that Partners has shared with Morgan
Stanley and are permitted a reasonable opportunity to collect, digest, analyze,
and react to all information relevant to a valuation of Partners that would be
provided in a normal acquisition due diligence context, a fully informed,
objective, and evenhanded parallel appraisal processes conducted by each of the
First and Second Appraisers cannot take place on a level playing field in the
abbreviated time periods specified in the charter.
47. As a result of Morgan Stanley's work with Partners since at least
January 2005, Morgan Stanley's receipt of nonpublic information about Partners
that is not available to Nextel and its access to Partners' management and
directors, Morgan Stanley's development, by January 2005, of what Partners
refers to as a "preliminary equity valuation summary range" based on, among
other things, nonpublic information provided by Partners that is not available
to Nextel, and Partners' failure to provide valuation information to Nextel, the
First Appraiser already has gained a material strategic and substantive
advantage over the Second Appraiser in being positioned to commence and complete
its appraisal work within the 30-day and 45-day deadlines set forth in the
charter. The charter neither requires nor contemplates that such an unintended
and unfair advantage will be conferred on Partners and its First Appraiser to
the material detriment of Nextel and its Second Appraiser. Partners' actions to
date have therefore upset the level playing field required by the charter.
48. This Court should therefore declare that (a) the information that
Partners is required to provide to the Second Appraiser and Nextel for the
valuation process includes, but is not limited to, all information that it has
provided to and received from Morgan Stanley that refers or relates to the put
process and valuation; (b) Partners is required to provide the Second Appraiser
and Nextel with all information in Partners' possession, custody, or control
relevant to
22
a valuation of Partners and to cooperate with Nextel and the Second Appraiser in
a thorough due diligence process designed to elicit all such information; and
(c) the 30-day and 45-day deadlines set forth in ss. 5.7(b) of the charter will
not begin to run until (i) Partners has complied with (a) and (b) above, (ii)
Nextel has had sufficient time to review and assess the information that it has
been provided and has developed in its due diligence activities and has
formulated a summary, analysis, critique, or other appropriate response for
submission to the appraisers, and (iii) the Second Appraiser has had adequate
time to develop a satisfactory level of comprehension of and familiarity with
all of such information that reasonably should offset a significant portion of
the disadvantage that has been created by Partners' retention of and interaction
with Morgan Stanley in its role as the First Appraiser.
C. PARTNERS ADVOCATES A LEGALLY UNSUPPORTABLE INTERPRETATION OF THE "MOST
RECENT UNAFFECTED PUBLIC MARKET STOCK PRICE" VALUATION PARAMETER
49. Under ss. 5.7(a) of the charter, "[i]f the Corporation's stock is
publicly traded, Fair Market Value WILL TAKE INTO CONSIDERATION (i) the trading
activity and history of the Corporation's stock and (ii) the Corporation's most
recent 'unaffected' public market stock price." (emphasis added).
50. As discussed above, Partners' stock is publicly traded, and its stock
price has increased significantly since the commencement of the recent
consolidation trends in the wireless telecommunications industry and since the
initial publication of rumors of the Sprint-Nextel merger. The trading price of
Partners' Class A stock has been affected by speculation surrounding the
possibility of a put exercise after consummation of the Sprint-Nextel merger
since well before December 9, 2004, when the WALL STREET JOURNAL published a
rumor on the Sprint-Nextel merger.
23
51. The proxy statement states that the appraisers "may look to different
time periods for their consideration of 'unaffected public market stock price'"
and sets forth Partners' view that "unaffected public market stock price is not
a static concept limited by the stock price prior to the announcement of the
Sprint-Nextel transaction, but rather, is a concept that should evolve over
time, taking into account business fundamentals, both for Nextel Partners and
for the wireless sector as a whole." The proxy statement further asserts that
"while an unaffected stock price must be taken into consideration, it may not
necessarily be used as the basis for valuation."
52. These statements make clear that Partners believes it is appropriate
for the appraisers either to "consider" unaffected public market stock prices
but not use them in the valuation or to develop and apply some hypothetical
"unaffected" market price that does not reflect an actual historical market
price before the trading price became "affected" but rather purports to take a
stock price that is not an "unaffected" stock price and to determine the extent
to which various factors -- perhaps evolving over time, and maybe (but not
necessarily) including factors other than anticipation of a put transaction --
may have "affected" that price, thereby deriving some form of synthetic
"unaffected price" that may bear no relation to a true trading price in an
actual market on a real day. Neither approach is proper. The charter does not
say that the appraisers may take into consideration the unaffected public market
stock prices in arriving at their FMVs. Rather, the charter requires that the
FMV "will take into consideration . . . [Partners'] most recent 'unaffected'
public market stock price." The appraisers, in other words, are not free to
consider but ultimately reject the relevance of unaffected public stock market
prices to FMV.
53. Nor does the charter say that the appraisers are free to calculate
"unaffected" price in some hypothetical, theoretical way. "Most recent
unaffected public market stock price," as
24
used in ss. 5.7(a), has a plain meaning -- an actual historical public market
price at a time before Partners' stock price started to be affected by
speculation about acquisition and consolidation activity in the wireless
telecommunications industry generally and at a time before the possibility of
the exercise of the put became manifest as a result of rumors about the
Sprint-Nextel merger. Accordingly, market prices at any time after (and for some
period before) the announcement of the Sprint-Nextel merger are not "unaffected"
market prices within the meaning of ss. 5.7(a).
54. The Court should therefore declare that (a) the appraisers must provide
FMV determinations that reflect Partners' "most recent unaffected public market
stock price" and are not free to simply consider and reject this factor as a
valuation parameter; and (b) the phrase "most recent unaffected public market
stock price," as used in the charter, means an actual historical market price
for Partners' stock at a time that pre-dates the December 9, 2004 publication of
rumors of the Sprint-Nextel merger and is not affected by speculation regarding
consolidations and mergers in the wireless telecommunications industry or the
exercise of the put triggered by the Sprint-Nextel merger.
D. PARTNERS ADVOCATES A LEGALLY UNSUPPORTABLE INTERPRETATION OF THE DIRECTIVE
THAT FMV NOT BE DISCOUNTED DUE TO THE FACT THAT ONLY NEXTEL HAS AN
IDENTICAL TECHNOLOGY PLATFORM
55. The wireless industry is heavily dependent on emerging technology, and
competition within the industry is often driven by the development and use of
new technologies that support new and innovative services. Anticipated changes
in technology in the wireless industry that affect services offered by Partners'
competitors, and an assessment of Partners' ability to meet those competitive
threats and the cost of doing so, are a necessary and critical component of any
valuation analysis. For example, Partners does not have broadband technology or
spectrum, and the capital spending required for Partners to move to broadband
technology would be very significant. One of the motivations for the
Sprint-Nextel merger was
25
the desire of each of Sprint and Nextel to implement the deployment of such
broadband technology both to provide new and unique services demanded by
customers and to remain competitive with the anticipated product and service
offerings of competitors, while minimizing the related capital expenditure
requirements. Any "willing buyer" of Partners and any appraisers assessing
Partners' future prospects would have to take into account that Partners has no
path to any commercially viable future technology platform and that, under the
contracts that govern its relationship with Nextel, has no right to launch such
a next generation technology platform without Nextel's consent. Even if Partners
sought to pursue a path to next generation technology with Nextel's consent, it
would need to obtain a sufficient amount of contiguous spectrum in each of its
markets required to make deployment of such next generation technologies
technically feasible, and also would need to incur the costs of development and
implementation, which would be expected to include the costs of acquiring and
installing new system infrastructure equipment, perhaps including significant
changes to the location of many of its cell sites, subsidizing a portion of the
new handset equipment switch-out costs incurred by its customers, and training
its existing employees or hiring new employees with the skills needed to
operate, maintain, sell, and service the new network and handsets.
56. Section 5.7(a) of the charter states that FMV will be determined under
a "willing buyer/willing seller" standard, with the assumption that "both buyer
and seller [are] in possession of all material facts concerning the Corporation
and its business." Nextel believes, and has publicly stated, that such a
valuation analysis must take into account future operating risks to Partners
arising from the changing competitive environment, including the advent of new,
competing technologies, the evolving competitive landscape in Partners'
territories, and the evolution of roaming. The proxy statement disputes this
position: "Sprint Nextel states that the
26
valuation process should take into account the changing competitive environment,
including the emergence of new technologies and evolution of roaming, which may
impact growth prospects and margins. In this regard, Nextel Partners believes
that our Certificate states that there will be no discount or premium in any
valuation due to the fact that only Nextel Communications has an identical
technology platform."
57. Partners' interpretation of the charter is erroneous. The charter
provides that "there will be no discount or premium in any valuation of the
Corporation relative to its business as conducted or reasonably expected to be
conducted due to the facts that . . . there may be few potential buyers for the
Corporation due to any real or perceived control of the Corporation exercised by
Nextel or due to the fact that only Nextel has an identical technology
platform." This provision, however, is not responsive to the issue raised by
Nextel, and the suggestion by Partners that it means that changes in the
competitive environment that pose risks to Partners' growth prospects and
margins can be ignored in determining FMV is flatly inconsistent with the
charter and with reasonable valuation practice and methodologies. The point is
not whether Partners' technology is the same as Nextel's technology, but the
effect of future technologies and competition on Partners' business and value as
an enterprise. Nextel concluded that the merger with Sprint was attractive for,
among other reasons, Nextel's perception of the impact of future technologies
and competitive trends on Nextel's own business, and that Nextel (together with
Sprint) would be far better prepared to respond effectively and economically to
these coming challenges than it would have been had it elected to "go it alone."
Moreover, these future technologies and competitive trends are not developments
having significance only for wireless providers that employ the current
technology platform shared by Nextel and Partners, but are matters of economic
concern and strategic importance for any wireless carrier operating on a
27
"second generation" technology platform or facing increasing competitive
pressure and industry consolidation -- a group that includes many more companies
than just Nextel and Partners.
Construing the "no discount" language as authorizing the appraisers to ignore
the effect of future technologies and competition on Partners' valuation would
read out of the charter the concept of a "willing buyer/willing seller" FMV.
Nothing in the charter authorizes such a counter-factual approach.
58. The Court should therefore declare that the "willing buyer/willing
seller" concept in the charter requires consideration of changes in the existing
and evolving technological landscape and the competitive environment that pose
risks to Partners' growth prospects and margins, and that the statement that
there shall be no discount due to "the fact that only Nextel has an identical
technology platform" cannot justify ignoring the impact of such changes in
arriving at a FMV.
E. PARTNERS ADVOCATES A LEGALLY UNSUPPORTABLE INTERPRETATION OF THE "CONTROL
PREMIUM" VALUATION PARAMETER
59. Section 5.7(a) of the charter states that Partners' FMV for the put
will "include a control premium and there will be no minority or illiquidity
discount."
60. One common valuation methodology that is routinely used by
professionals appraisers in valuing businesses and that could be used by the
appraisers in determining FMV is the DCF methodology. The proxy statement
asserts that, in applying the definition of FMV set forth in the charter, is
appropriate to add a control premium to a DCF value.
61. Delaware courts have acknowledged that it is improper to add a control
premium to a valuation determined by the DCF methodology. As one court has
succinctly explained, "the addition of a control premium to a DCF analysis is
not consistent with proper and usual valuation practice. In a DCF analysis, the
company's projected cash flow is already part of the analysis --
28
one predicts the company's fixture cash flow, and these projections should take
into account any expectations of improved earnings. A DCF analysis looks to the
value of the entire business and not the value of a minority interest. . . . A
control premium is normally not applicable to a discounted cash flow valuation,
because a DCF calculation values the cash flows of the entire company. . . .
[T]he DCF method sets an upper limit on value. If the future cash flows of a
company are worth $10 million, why would anyone pay more?" LIPPE V. BAIRNCO
CORP., 288 B.R. 678, 698 (S.D.N.Y. 2003). Delaware courts have consistently
reached the same result. SEE MONTGOMERY CELLULAR HOLDING CO., INC. V. DOBLER,
880 A.2d 206, 217, 224 n.49 (Del. 2005); IN RE TOYS "R" US, INC. SHAREHOLDER
LITIG., 877 A.2d 975, 1013 (Del. Ch. 2005) ("Adding a control premium on top of
a DCF is not . . . intuitively or theoretically logical."). Contrary to
Partners' proxy statement, a DCF analysis already presumes the benefit of
control over operations and cash flow, and no additional control premium is to
be added to any valuation using such a methodology.
62. The Court should therefore declare that the appraisers appointed under
ss.ss. 5.7(b) and (c) of the charter may not add a control premium to any values
determined with a DCF valuation methodology.
CLAIM FOR RELIEF
(DECLARATORY JUDGMENT)
63. Nextel re-alleges and incorporates by reference each allegation set
forth above.
64. An actual controversy exists between Nextel and Partners regarding the
interpretation and application of the terms and provisions of the charter
relating to the put process and the determination of FMV.
65. Accordingly, Nextel requests a declaration of the parties' rights and
obligations under the charter with respect to the exercise of the put right.
29
WHEREFORE, Nextel requests the following relief:
1. That the Court enter a declaratory judgment, declaring as follows:
(a) Partners' announced intention to disclose publicly the FMVs
assigned to Partners by the First and Second Appraisers and the related
reports as promptly as practicable is prohibited by the provision of the
charter requiring that the Third Appraiser not be informed of the FMVs of
the First and Second Appraisers and, if implemented, it will destroy the
integrity of the "final and binding" appraisal process established by the
charter and thereby preclude the use of the Third Appraiser process
contemplated by the charter to determine Partners' FMV;
(b) the reports of the First and Second Appraisers should be delivered
to Nextel and to Partners' board and not to Partners' stockholders, and the
recipients of the reports should be ordered to hold those reports in strict
confidence and not to disclose the FMV determinations or reports of the
First and Second Appraisers, or the substance thereof unless the FMVs they
determine are within 10%, in which event no Third Appraiser would be
appointed under the charter;
(c) the information that Partners is required to provide the Second
Appraiser and Nextel for the valuation process includes, but is not limited
to, all information that it has provided to and received from Morgan
Stanley that refers or relates to the put process and valuation;
(d) Partners is required to provide the Second Appraiser and Nextel
with all information in Partners' possession, custody, or control relevant
to a valuation of Partners, including but not limited to all information
that it has provided to and received from Morgan Stanley to date that
refers or relates to the put process and valuation, and to
30
cooperate with Nextel and the Second Appraiser in a thorough due diligence
process designed to elicit all such information;
(e) the 30-day and 45-day deadlines set forth in ss. 5.7(b) of the
charter will not begin to run until (i) Partners has complied with (c) and
(d) above, (ii) Nextel has had sufficient time to review and assess the
information that it has been provided and has developed in its due
diligence activities and has formulated a summary, analysis, critique, or
other appropriate response for submission to the appraisers, and (iii) the
Second Appraiser has had adequate time to develop a satisfactory level of
comprehension of and familiarity with all of such information that
reasonably should offset a significant portion of the disadvantage that has
been created by Partners' long-standing retention of and interaction with
Morgan Stanley in its role as the First Appraiser;
(f) the phrase "most recent unaffected public market stock price" is a
valuation parameter that must be reflected in the appraisers'
determinations of FMV, and, as used in ss. 5.7(a) of the charter, means an
actual market price for Partners' stock at a time that pre-dates the
December 9, 2004 publication of rumors of the Sprint-Nextel merger and is
not affected by speculation regarding consolidations and mergers in the
wireless telecommunications industry or the exercise of the put right
triggered by the Sprint-Nextel merger;
(g) the "willing buyer/willing seller" concept in the charter requires
consideration of changes in the existing and evolving technological
landscape and the competitive environment that pose risks to Partners'
growth prospects and margins, and the statement that there shall be no
discount due to "the fact that only Nextel has an
31
identical technology platform" cannot justify ignoring the impact of such
changes in arriving at a FMV; and
(h) the appraisers appointed under ss. 5.7(b) and (c) of the
Charter may not add a control premium to any values determined by a DCF
valuation methodology.
2. That the Court enter an order granting Nextel such further relief as the
Court deems just and proper under the Court's equitable and legal powers.
POTTER ANDERSON & CORROON LLP
OF COUNSEL:
By: /S/ STEPHEN C. NORMAN
Richard I. Werder, Jr. Michael D. Goldman (#268)
Michael J. Templeton Stephen C. Norman (#2686)
JONES DAY Brian C. Ralston (#3770)
222 East 41st Street Timothy R. Dudderar (#3890)
New York, New York 10017 Hercules Plaza, 6th Floor
(212) 326-3939 1313 N. Market Street
P.O. Box 951
Robert C. Weber Wilmington, DE 19899
JONES DAY
North Point Attorneys for Plaintiffs
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
Dated: October 7, 2005
702502
32
EXHIBIT 99.2
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NEWS RELEASE
--------------------------------------------------------------------------------
[NEXTEL PARTNERS, INC. LOGO] NEXTEL PARTNERS, INC.
4500 Carillon Point
Kirkland, WA 98033
(425) 576-3600
CONTACTS:
INVESTORS: ALICE KANG RYDER (425) 576-3696
MEDIA: SUSAN JOHNSTON (425) 576-3617
NEXTEL PARTNERS RESPONDS TO LAWSUIT FILED BY
NEXTEL COMMUNICATIONS IN DELAWARE CHANCERY COURT
KIRKLAND, Wash., October 10, 2005 - Nextel Partners, Inc. (NASDAQ: NXTP) today
issued the following statement regarding the lawsuit filed against Nextel
Partners in Delaware Chancery Court on October 7, 2005 by Nextel Communications,
Inc. and its subsidiary, Nextel WIP Corp.:
We believe that Nextel's lawsuit has no merit and is just
one more attempt to rewrite an agreement that they willingly
entered into seven years ago in order to pay less than they
are required to pay for Nextel Partners' publicly traded
shares under that agreement. This time Nextel has asked the
Court to concur with Nextel's oft-repeated interpretations
of fair market value under Nextel Partners' charter. We
believe that Nextel's interpretations are wrong and its
motives are transparent, and we look forward to presenting
our case before the Court.
Nextel Partners will continue to take all actions necessary
to protect the Company and its shareholders as we move
through the put process. We also intend to hold Sprint
Nextel fully responsible for any damage that its breaches
and inappropriate actions may cause Nextel Partners or its
shareholders.
In addition to asking the Court to concur with Nextel's previously disclosed
interpretations of the definition of fair market value, Nextel's lawsuit also
seeks to prohibit Nextel Partners from disclosing to its public shareholders, as
required by Nextel Partners' charter, the valuation reports of the first two
appraisers to be appointed under Nextel Partners' put process. The suit also
seeks to require Nextel Partners to provide Nextel and its appraiser with
certain financial information.
Nextel Partners indicated that it will ask the Court to hear the case on an
expedited basis to facilitate the timely execution of the put process. As
previously announced, Nextel Partners' shareholders will vote on whether to
exercise their put right to sell Nextel Partners to Nextel at the upcoming
special meeting on October 24, 2005. If Nextel Partners' shareholders elect to
exercise the put, each company must select an appraiser within 20 days. The
charter requires the appraisal process to be completed no later than 110 days
after the shareholder vote and Nextel Partners does not anticipate any delay in
this process.
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"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
A number of the matters and subject areas discussed in this press release that
are not historical or current facts deal with potential future circumstances and
developments, including without limitation, matters related to Nextel Partners'
future financial and operating results. The words "believe," "expect," "intend,"
"estimate," "assume" and "anticipate," variations of such words and similar
expressions identify forward-looking statements, but their absence does not mean
that a statement is not forward-looking. The discussion of such matters and
subject areas is qualified by the inherent risks and uncertainties surrounding
future expectations generally, and also may materially differ from Nextel
Partners' actual future experience involving any one or more of such matters and
subject areas. Such risks and uncertainties include the economic conditions in
our targeted markets, performance of our technologies, competitive conditions,
customer acceptance of our services, access to sufficient capital to meet
operating and financing needs and those additional factors that are described
from time to time in Nextel Partners' reports filed with the SEC, including
Nextel Partners' annual report on Form 10-K for the year ended December 31, 2004
and its quarterly filings on Form 10-Q. This press release speaks only as of its
date, and Nextel Partners disclaims any duty to update the information herein.
ABOUT NEXTEL PARTNERS
Nextel Partners, Inc., (NASDAQ: NXTP), a FORTUNE 1000 company based in Kirkland,
Wash., has exclusive rights to offer the same fully integrated, digital wireless
communications services offered by Nextel Communications (Nextel) in mid-sized
and rural markets in 31 states where approximately 54 million people reside.
Nextel Partners and Nextel together offer the largest guaranteed all-digital
wireless network in the country serving 297 of the top 300 U.S. markets. To
learn more about Nextel Partners, visit WWW.NEXTELPARTNERS.COM.
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