Dish Network has again wedged itself in the middle of a pending acquisition attempt, announcing late yesterday an offer of $4.40 per share to acquire a minimum of a 25% stake in Clearwire, which is set to vote on a pending offer of $3.40 per share for a complete acquisition by Sprint Nextel.
The Dish offer is indeed for all of Clearwire’s shares, though Sprint Nextel currently controls just over 50% of that stock and plans to acquire the remaining shares through its recently upgraded offer. Clearwire voters are scheduled to vote on that offer this Friday. Dish added that if it garners just 25% of Clearwire’s shares, it would also be looking to have three seats on its 13-seat board of directors. Sprint Nextel currently controls seven of those seats.
In addition to the superior price-per-share, Dish said it would also provide Clearwire with $80 million per month in funding for ongoing operations, similar to the arrangement provided by Sprint Nextel, which Clearwire has dipped into on numerous occasions. Clearwire’s management recently noted that without that funding it was on track to run out of money by the end of the year.
“We are confident that this offer is clearly superior to the proposed Sprint merger,” noted Dish Chairman Charlie Ergen in a note to Clearwire Chairman John Stanton. “It offers substantially greater value to Clearwire and your minority stockholders and a clearer path to value realization for all parties. Importantly, it also provides a meaningful alternative to the significant group of your minority stockholders that remain opposed to the Sprint merger. We also are confident based on our conversations with you and our review of your publicly available governance arrangements that it can be executed without being subject to a successful challenge by any of your existing major stockholders. Our offer is not subject to any financing contingency. While we would still be pleased to work towards a mutually agreeable spectrum transaction with Clearwire in the future, we thought it important to make this improved, yet simplified offer now.”
Clearwire has spent the past several weeks trying to convince shareholders to vote in favor of the Sprint Nextel offer, both at its original $2.97 per share price, and more recently at its $3.40 per share offer. Clearwire’s stock (CLWR) was buoyed by the latest Dish offer, surging nearly 20% in early Thursday trading to more than $4.25 per share.
Clearwire’s “special committee” tasked with reviewing the offers has been in favor of the Sprint Nextel offer, but in light of the latest push by Dish noted it “will review it to determine the best course of action for the company and its stockholders. The special committee has not made any determination to change its recommendation of the current sprint transaction.”
Further complicating Dish’s attempt to acquire a stake in Clearwire is the support thrown behind the Sprint Nextel offer by current Clearwire shareholders and Dish rivals in the cable business, including Comcast and Bright House. Those two cable providers, along with chip giant Intel, own approximately 13% of Clearwire’s stock.
“Clearly, with Dish being a competitor to some of these companies (namely Comcast), there may be some resistance to supporting a Dish/[Clearwire] alliance,” explained Wells Fargo senior analyst Jennifer Fritzsche, in a research note, adding that those companies included a clause in their shareholder agreement allowing them to block a Dish acquisition attempt of Clearwire.
Dish had originally put in an offer to acquire Clearwire earlier this year, usurping the initial bid put in by Sprint Nextel. That offer remained on the table as Dish then seemed to move its attention to bigger fish, putting in a $25.5 billion bid to acquire a 68% stake in Sprint Nextel, which itself was reviewing a $20.1 billion acquisition attempt for 70% of its shares by Japan’s Softbank. The Dish offer for Clearwire did seem to hang over the heads of some Clearwire shareholders that were looking for a bigger payout, something that Sprint Nextel was eventually forced to provide just days before Clearwire shareholders were initially set to vote on the offer.
Dish Network’s moves to push into the mobile space followed its garnering of approval to use 30 megahertz of spectrum in the 2 GHz band for use in a terrestrial telecommunications network. A partnership with an already established player would allow Dish to enter the market without having to fund an expensive build out or attempt to compete directly with established wireless players.
Should Dish Network’s attempt to acquire either a piece of Clearwire or Sprint Nextel fall short, many see Dish adjusting its sights to T-Mobile US, which recently completed the financial merger with MetroPCS. T-Mobile US’ current ownership structure has German telecom giant Deutsche Telekom in control of 74% of the operation, while MetroPCS controls the remaining 26%. DT has been looking for ways to extract itself from the domestic market – for the right price – as evident by AT&T’s near total acquisition of T-Mobile USA in 2011.
Dish has also been aggressive in attempting to secure additional spectrum assets, having reportedly offered $2 billion for LightSquared’s 1.6 GHz spectrum holdings that remain tied up in regulatory and bankruptcy limbo.
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