Class action claims Virgin Mobile undervalued in Sprint deal

A class-action lawsuit has been filed in state court in New Jersey against Virgin Mobile USA, claiming that Sprint Nextel's proposed $483 million acquisition offer undervalues the company. The complaint, filed by the law firm Levi & Korsinsky, alleges that Virgin Mobile did not do enough to maximize shareholder value.

The value of the deal, which was announced in late July, includes Sprint's 13.1 percent ownership stake in Virgin Mobile. Additionally, Sprint will retire all of Virgin Mobile's debt at the close of the deal. The acquisition was seen as an attempt by Sprint to double-down on the prepaid segment and gain another brand.

As part of the deal, Virgin Mobile shareholders will receive Sprint shares that have a 10-day average closing price equivalent to $5.50 per Virgin Mobile share. Pending regulatory and shareholder approval, the deal is expected to close in the fourth quarter or in early 2010.

The complaint alleges that Virgin Mobile "agreed to refrain from soliciting competing offers that may be superior than the Sprint offer and also agreed to pay Sprint a termination fee of $14.2 million in the event the agreement is terminated under certain circumstances that will all but ensure that no superior offer will ever be forthcoming."

Sprint spokesman James Fisher declined to comment on the lawsuit but said that the carrier believes that "the acquisition of Virgin Mobile USA by Sprint is in the best interest of Sprint and Virgin Mobile USA shareholders." Virgin Mobile USA spokeswoman Jayne Wallace echoed Fisher's comments.

For more:
- see this release [1]

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Sprint buying Virgin Mobile USA for $483M [4]
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Virgin Mobile to offer prepaid mobile broadband [6]