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Why Sprint Nextel Shares Skyrocketed

By Evan Niu, CFA - Apr 15, 2013 at 2:51PM

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Is this meaningful, or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sprint Nextel (S) have skyrocketed today by as much as 18% after DISH Network (DISH 0.18%) made an unsolicited offer to acquire the wireless carrier.

So what: The $25.5 billion deal rivals a separate $20.1 billion merger proposed by Japan's SoftBank late last year. DISH's offer values Sprint at $7 per share, which includes $4.76 per share in cash and the rest in the form of stock. That would allow shareholders to potentially enjoy additional upside from the combined company.

Now what: DISH believes that the combined company could generate synergies and growth opportunities valued at $37 billion, including $11 billion in cost savings. The stock portion of the deal would represent approximately 32% ownership in the combined company. DISH estimates that its offer represents a 13% premium to SoftBank's offer. DISH hopes to create a company that offers a fully integrated nationwide bundle of in-home and out-of-home services.

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