Sprint Corp., hampered for years by a troubling merger with Nextel Communications, has agreed to pay $131 million to settle a class-action investor lawsuit it triggered.
The deal ends six years of battle that produced 8.7 million pages of documents, 65 subpoenas, 40 depositions and mediation sessions with a nationally recognized mediator. It includes claims from each side that settling makes more sense than continuing the fight.
In an emailed statement, Sprint said it “has and will continue to operate in complete adherence with all federal securities laws. Nevertheless, our company has reached an agreement to settle this matter to avoid further expense and distraction of this litigation.”
The $131 million settlement, if approved by the court, would go into a court-supervised settlement fund that will cover the investors’ attorneys and claims of investors covered by the lawsuit.
Writing the check amounts to Sprint surrendering two days’ worth of revenues it collects from subscribers.
For Sprint, settling also means putting behind it one more unwelcome vestige of the $36 billion 2005 merger widely seen as one of corporate America’s worst at the time. Sprint and Nextel were unable to meld their technologically incompatible wireless networks, with the merged company finally shuttering Nextel’s network in mid-2013.
Along the way, however, the burden of running parallel networks sapped Sprint financially and led many of the Nextel subscribers to get away.
The merger had begun with much promise and that vision, delivered by co-defendants including then-CEO Gary Forsee, defrauded investors in Sprint stock and bonds, the lawsuit had charged.
Investors had complained that between Oct. 26, 2006 and Feb. 27, 2008, Sprint Nextel Corp. and top officials claimed the merger was generating significant benefits. They had cited references in conference calls with Wall Street analysts, statements in news releases and financial results in filings with the Securities and Exchange Commission.
These claims, according to the lawsuit, included billions of dollars of savings from the merger, a better mix of customers from changes in credit standards and progress combining the two wireless networks.
A year ago, a U.S. district judge approved the lawsuit’s status as class action, meaning it would represent the interest of investors in Sprint shares and bonds between those two dates.
Sprint continued to deny those claims in a settlement document filed Monday in U.S. District Court in Kansas. It also acknowledged the cost and uncertainty of trial.
Investors, led by a small group, echoed those same sentiments in the document, convinced of the claims but also aware of the expense and uncertainty of taking the lawsuit “through trial and through appeals.”
The preliminary accord requires court approval.
Sprint dropped Nextel from its name after Tokyo-based SoftBank Corp acquired 80 percent of the Overland Park-based wireless carrier.
The lead investors in the lawsuit were the United Steelworkers’ PACE Industry Union-Management Pension Fund, Skandia Life Insurance Co. and the West Virginia Investment Management Board.