US satellite broadcaster Dish Network has vowed to focus “efforts and resources” on its tender offer for Clearwire Corporation after missing a bidding deadline for larger telco Sprint Nextel. The company had until 18 June to improve its US$25.5bn…
US satellite broadcaster Dish Network has vowed to focus “efforts and resources” on its tender offer for Clearwire Corporation after missing a bidding deadline for larger telco Sprint Nextel.
The company had until 18 June to improve its US$25.5bn offer for Sprint, after the country’s third largest mobile operator called off the due diligence process and backed a rival bid from Japan’s Softbank.
As Softbank placed its sweetened US$21.6bn offer, the two companies agreed to up the break-up fee by US$200m, meaning the Japanese mobile operator will receive US$800m if a rival swooped in and acquired its target.
Their new agreement also altered the definition of what a superior competing offer is, ruling out “any proposal that is not fully financed pursuant to binding commitments from recognised financial institutions”.
Dish said: “While Dish continues to see strategic value in a merger with Sprint, the decisions made by Sprint to prematurely terminate our due diligence process and accept extreme deal protections in its revised agreement with SoftBank, among other things, have made it impracticable for Dish to submit a revised offer by the 18 June deadline imposed by Sprint.
“We will consider our options with respect to Sprint, and focus our efforts and resources on completing the Clearwire tender offer.”
Clearwire backs Sprint
The DTH giant’s US$4.40 per share tender offer – for a minimum of 25% of Clearwire – had the backing of the wireless broadband operator’s special committee. However Sprint, which owns more than half of Clearwire’s stock, upped its bid for the shares it does not own from US$3.40 to US$5 each.
Clearwire now backs Sprint’s latest proposal, which represents a 14% premium on the offer Dish put forward earlier this month.
This is the third time Clearwire has recommended a bid from Sprint. Previous offers were subsequently countered by higher bids from Dish.
This time around Sprint has won support from a number of the smaller investors that had been against the operator’s takeover attempt.
The supporting shareholders include Mount Kellett Capital Management, Glenview Capital Management, Chesapeake Partners Management and Highside Capital Management. They represent 9% of Clearwire’s voting shares; the firms will sell their shares to Sprint even if the operator’s latest merger agreement fails.
Together with commitments it has already received from a group of companies holding 13% of the wireless internet provider, and stock from Clearwire directors and officers, Sprint said it has support from 45% of the minority shareholders. It needs 50% of them to back its latest offer to seal the deal.
“Sprint expects a majority of the non-Sprint stockholders to support the Clearwire merger based on these agreements and the votes of shareholders with both Sprint and Clearwire shareholdings who have already voted in favour of the Sprint/Softbank transaction,” the operator said in a statement.
Sprint and Clearwire have also added a US$115m break-up fee to the agreement, which Clearwire would have to pay to Sprint in the event that the transaction terminates.
Sprint first agreed a deal with Clearwire last December, which would have seen it pay US$2.97 for each outstanding share – its latest US$5 offer represents a 68% premium on that initial offer.
Clearwire’s shareholder vote on Sprint’s offer has been pushed back to 8 July from 24 June. By then Sprint shareholders should have voted on Softbank’s takeover bid. Sprint’s acquisition of Clearwire is contingent on that deal closing, but the Japanese telco is now in pole position after Dish walked away from the process. Indeed, Dish has signalled intentions to redeem bonds that would have gone towards its proposed US$25.5bn merger.
Analysts believe Sprint’s latest offer for Clearwire will finally get the deal done. In a note, New Street Research analyst Jonathan Chaplin said that the committed backing from 45% of Clearwire’s minority shareholders made “the likelihood of approval very high”.
He said: “We don’t see how Dish can break up this deal now … We think this deal is done (at last).”
BTIG Research analyst Walter Piecyk agreed that the deal was set to be approved by shareholders, adding it would get done “regardless of any new overtures from Dish”.
He added: “If Softbank can gain Sprint shareholder approval next week and gain FCC approval it will launch a formidable new competitor into the US Wireless industry and jump start the development of a 2.5/2.6 GHz ecosystem and TDD-LTE.”
Sprint sues Dish/Clearwire
Before increasing its bid, Sprint sought to block Dish’s tender offer for Clearwire with a lawsuit that claims it is structurally and actionably coercive.
In its complaint, the company claimed the deal violates a shareholder agreement it shares with Clearwire, as well as its company charter.
It said these agreements prohibit the tender offer from being completed without the support of 75% of Clearwire’s shareholders, as well as the approval of another key shareholder, Comcast.
According to Sprint, Dish has “repeatedly attempted to fool Clearwire’s shareholders into believing its proposal was actionable in an effort to acquire Clearwire’s spectrum and to obstruct Sprint’s transaction with Clearwire”.
It also claimed the offer is “unlawfully coercive” because it threatens to leave non-tendering shareholders in a company subject to governance deadlocks or substantial damage awards to Dish – if Clearwire is unable to meet “unenforceable promises” laid out in the offer.
Clearwire, which is a defendant in the lawsuit along with Dish, has yet to comment on the legal action.
On the same day that Sprint filed its complaint, the satellite broadcaster announced that it had received antitrust approval for its Clearwire offer, after a waiting period expired on 14 June without objection.
Jefferies is tender manager for Dish’s Clearwire offer.
