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Centel Confident of Victory After Vote on Sprint Merger

December 3, 1992

CHICAGO (AP) _ Centel Corp. officials said Wednesday they believe they won shareholder approval to merge with fellow phone company Sprint Corp., passing the biggest roadblock in one of the year’s most contested buyouts.

″We’re confident based on what we have in our hands right now that the merger will be approved,″ Centel chairman John Frazee said after shareholders voted on the deal at a meeting Wednesday morning.

But a large number of proxy votes - votes from shareholders not at the meeting - kept the company from claiming victory, he said. Centel officials said they would not release any vote totals until Dec. 11.

Sprint said its stockholders approved the merger at their own meeting Wednesday in Kansas City. The merger, essentially a buyout of Centel, requires majority approval of shareholders of both companies.

Sprint officials did not reveal the vote totals but said the merger received a substantial margin of the votes cast. They said about 70 percent of the 156 million shares were voted.

″We’re obviously very pleased and gratified with the approval of our stockholders,″ said William T. Esrey, president and chief executive officer.

At the Centel meeting, dissenting shareholders argued that the Chicago- based company is worth more than Sprint offered. Under the plan, they would receive 1.37 Sprint shares for each Centel share. At the time the plan was announced in May, that valued Centel at $2.85 billion.

The plan was controversial because it valued Centel shares at much less than they were trading at the time the deal was announced.

Centel’s stock traded as high as $47.75 a share after executives of the company announced in January they wanted to sell the company, which offers local and cellular phone service in many states. But the terms of the Sprint deal sent prices plunging to below $30.

The actual value of the deal will be based on Sprint’s stock price when the deal is closed, which won’t occur until the deal receives approval from shareholders and regulators.

Robert Enslein, an associate at Moran Asset Management in Greenwich, Conn., said Centel is worth at least $50 a share, compared with the estimated $29 that shareholders would receive in the stock swap. Moran’s clients hold 400,000 of the 85 million outstanding Centel shares.

″This is not a good deal for Centel shareholders,″ Enslein said.

By the 4 p.m. close of trading Wednesday, Centel was selling for $34 a share on the New York Stock Exchange, up 12 1/2 cents. Sprint was trading at $25.87 1/2 , down 12 1/2 cents.

David Shell, a vice president with Eagle Asset Management Inc. in St. Petersburg, Fla., said Sprint’s limited position of the long-distance market worries him. Sprint is the third-largest long-distance company after AT&T and MCI Communications Corp.

″Sprint’s market share has bounced up against this 10 percent glass ceiling for several years, and we don’t see that changing,″ he said. ″Management, both Centel and Sprint, are asking us to take on added risk.″

Eagle’s clients hold 4.6 million Centel shares, or 5.3 percent of the total.

But Frazee, who said he would serve as president and chief operating officer of the merged company, said the offer is the best deal available.

″I think the biggest shock to everybody was the price. But we believe the market spoke,″ Frazee said.

And he said Sprint has done ″an extraordinary job of competing against AT& T and MCI, who have been around a heck of a lot longer than Sprint.″

Centel revealed in a proxy statement in October that the Sprint bid was the only offer it received to buy the entire company. Other bidders only were interested in pieces of it.

Moran vice president Joseph Furfaro says Centel’s refusal to disclose preliminary vote tabulations made him question Frazee’s early prediction of victory.

Centel had 1991 revenue of $1.9 billion. It offers local phone service in six states, and controls cellular phone franchises in 42 metropolitan markets and 50 rural areas.

Esrey has argued that the merger makes sense because it would make Sprint the only U.S. company offering local, long-distance and cellular phone service. That could allow the company to market these services jointly.

Currently, Sprint offers local service as well as long distance.

Esrey also said the merger could save the combined company about $145 million in operating costs in the first few years through consolidations, including the expected elimination of about 1,000 jobs.

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