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Sprint Gobbles Up Virgin Mobile For $483 million

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Sprint set to acquire Virgin Mobile

In what looks to be shaping up to be another healthy week for M&A activity, Sprint Nextel is putting more of its focus on the prepaid cell phone service market with a $483 million deal to buy out Virgin Mobile USA.

The acquisition, which was announced earlier this morning, calls for Sprint to pay $5.50 in stock for each Virgin Mobile share, a 31 percent premium to the MVNO’s closing share price Monday of $4.21. The deal is expected to receive approval either in the fall or in early 2010.

Sprint Nextel actually already owned 13.1 percent of Virgin Mobile, which uses the carrier’s network to offer service to some 5.2 million subscribers. The deal cancels out Virgin’s $248 million in outstanding debts and will unite Sprint’s Boost service and Virgin Mobile under the same roof. Sprint says it would keep the Virgin Mobile brand and let Virgin Mobile USA’s CEO Dan Schulman, run Sprint’s entire prepaid business if and when the deal closes late this year or early next.

In that case, Virgin Mobile shareholders will own about 3 percent of Sprint. Richard Branson’s Virgin Group owns 28.3 percent of Virgin Mobile, while South Korean carrier SK Telecom has a 15.3 percent stake that it got when Virgin Mobile last year bought Helio, another prepaid carrier that uses Sprint’s network.

Virgin Mobile shares jumped to $5.20 in premarket trading on Tuesday, while Sprint shares rose to $4.60 from their close at $4.55.

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