Bolstered by a 47% bump in the offer price, Clearwire’s “special committee” has switched alliances in throwing its support behind Sprint Nextel’s newly updated offer to acquire the remaining stake in Clearwire for $5 per share. That new offer supersedes Sprint Nextel’s previous offer of $3.40 per share as well as Dish Network’s offer of $4.40 per share that had garnered the special committee’s previous recommendation.
As part of the increased offer, Sprint Nextel also reported that it has received commitments from a group of Clearwire shareholders representing approximately 9% of the company’s outstanding stock to support the Sprint Nextel offer. That is in addition to previous commitments from Comcast, Intel and Bright House Networks that control 13% of Clearwire’s stock in backing Sprint Nextel’s attempt to boost its current 51% stake in Clearwire.
“The Clearwire board and special committee have determined that the $5 per share transaction with Sprint represents the best path forward for the company and is in the best interest of our unaffiliated stockholders,” explained Clearwire CEO and President Erik Prusch in a statement. “The amended agreement with Sprint clearly acknowledges the significant value present in Clearwire – from our deep portfolio of wireless spectrum to the tremendous amount of progress the Clearwire team has made in improving our operations and beginning the construction of our next-generation 4G LTE network.”
In total, Sprint Nextel would seem to have more than 72% of Clearwire’s stock locked up, a percentage that analysts noted should be enough to counter Dish Network’s latest offer that had the company looking to acquire at least 25% of Clearwire and three seats on the company’s board of directors.
“Sprint controls 72% of total diluted shares but greater than 75% of the total shares using Dish’s definition),” noted Wells Fargo Securities senior analyst Jennifer Fritzsche in a research note. “We would note that Dish cannot acquire 25% of total shares by its definition following today’s announcement, but this does not preclude Dish from changing its offer and eliminating the 25% minimum tender requirement or modifying its offer entirely.”
Sprint Nextel earlier this week filed a lawsuit in order to block the latest Dish Network acquisition attempt, noting the deal violated state law and the rights of Clearwire stakeholders. Many of the claims in the lawsuit were previously noted to Clearwire’s board following its approval of the Dish Network bid. Dish Network retorted with its own letter to Clearwire’s board refuting the Sprint Nextel claims.
In addition to the price-per-share increase, Sprint Nextel’s new offer includes a clause that will require Clearwire to pay a $115 million termination fee, or 3% of the equity value of the minority stake should the deal now fall apart. Of course the new deal also postpones yet again Clearwire’s scheduled vote on its future, with the shareholder vote set for July 8.
Sprint Nextel noted in its statement that picking up the remaining stake in Clearwire will bolster its attempts to tap into Clearwire’s 2.5 GHz spectrum holdings as part of its Network Vision upgrade program. Sprint Nextel has repeatedly noted that the network upgrade plan to install LTE services would support Clearwire’s 2.5 GHz spectrum. In addition, Sprint Nextel recently announced new devices that will support LTE service running across its current 1.9 GHz deployment, planned 800 MHz expansion and Clearwire’s plans to deploy LTE in the 2.5 GHz band.
Dish Network earlier this week appeared to back away from its parallel attempt to acquire a 68% stake in Sprint Nextel for $25.5 billion after Japan’s Softbank increased its offer to acquire Sprint Nextel, which received approval from Sprint Nextel’s board of directors. The updated Softbank offer called for the company to pay $21.6 billion for a 78% stake in Sprint Nextel.
Dish Network noted in a Securities and Exchange Commission filing that in abandoning the Sprint Nextel deal, it was redeeming previously issued notes initially provided in order to help fund the possible acquisition.
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