Kansas City, Missouri-based Sprint Corp appears to have won the unofficial bidding for Chicago-based Centel Corp, winning Centel’s agreement to a share exchange offer that values Centel at only $2,850m – way below the value put on the company by the market. Sprint will exchange 1.37 new shares for each Centel, valuing each Centel at about $33.56 where it had been trading in the market at $42.50, and some analysts reckoned it could be worth as much as $60 a share to a buyer. The enlarged Sprint, with annual turnover of about $10,000m and assets of $14,000m, reckons it will be the only company playing in all the three major telephone markets – local, long-distance and cellular. Our combined corporation will be able to serve customers no matter what type of telecommunications services they require, said Sprint chairman and chief executive William Esrey, who will retain the post after the merger. Sprint has 4m local lines in 17 US states, Centel has 1.6m lines in six states, in four of which Sprint is also present. Centel has interests in 40 metropolitan and 50 rural cellular franchises. All Centel’s phone customers are served by digital switching while nearly 90% of Sprint’s local customers are served digitally. The would-be partners expect to close the transaction in six to eight months, but with several big arbitrageurs nursing very burned fingers as a result of the low price – seen in particular as a steal in relation to the recent valuations of cellular properties, it seems likely that there will be strenuous efforts to squeeze a higher price for Centel – Centel shareholders have to vote on proposal and may well reject it. Centel chairman John Frazee said that the companies have been talking for several weeks and had talked about such a combination on and off for a couple of years now.
