UPDATE: Greywolf Capital Says Sprint's IPCS Offer Far Too Low

Greywolf Capital Management LP, one of iPCS Inc.'s (IPCS) largest shareholders, voiced its opposition to Sprint Nextel Corp.'s (S) proposed $426 million bid for the wireless provider, saying the deal woefully undervalues the last of Sprint's major independent affiliates.

The hedge-fund operator, which owns an 8.2% stake in iPCS, said in a letter Tuesday to fellow shareholders that the $24-a-share price "reflects neither the fundamental business value of iPCS nor the value of iPCS's breach of contract claims against Sprint."

Sprint in June announced plans to sell network assets in several Midwestern states to comply with a court ruling to divest Nextel assets. That came after iPCS sued Sprint several times to prevent the carrier from competing in iPCS territory.

Greywolf, which has been an investor in iPCS since 2004, said it has long expected an eventual buyout by Sprint. But it called the agreed-to price "far too low" and went on to say that based on the price paid for other former Sprint affiliates, a suitable offer price would be $34 to $47 a share.

The hedge fund had only last month switched its federal filings to designate it was an activist holder in iPCS instead of a passive one.

Analysts said while Greywolf's arguments about the value of litigation success may have some validity, the protest was unlikely to become a roadblock for Sprint.

"The bottom line is they only own 8%, so I'm not sure it matters much," Stifel Nicolaus analyst Christopher King said. "In terms of this leading to some new offer, I'm highly doubtful."

Soleil analyst Michael Nelson added that while the transaction multiple Sprint is offering might not be as rich as past deals, the valuation multiples have come down across the industry and it would be unreasonable to expect similar deals to a few years ago.

Meanwhile, Zachary Investment Research analyst Patrick Comack said iPCS investors are likely to trust the management team, largely because of its success in court.

"Management has been quite belligerent and they've been very successful in the courts, so once iPCS' management decided it's over, it's over," Comack said. "If they felt like they had more upside, they'd still be holding out."

Greywolf's fight against the deal faces an uphill battle as the deal is being backed by private-equity giant Apollo Management, which hold an 8% stake in iPCS. The offer was a 34% premium, and other company investors have also been seen as backing the bid.

Shares of iPCS stayed at $23.99 on Tuesday, signaling the market also wasn't anticipating a new offer. Shares leapt to the $24 price on Oct. 19 when the offer was made and have remained close ever since.

Sprint shares, meanwhile, continued a recent run-up, rising 6% to $3.71 in afternoon trading.

-By David Benoit and Kathy Shwiff, Dow Jones Newswires; 212-416-2458; [e-mail]