Activist investor Crest Financial has commissioned a study to underline its claim that Sprint Nextel’s offer to buy Clearwire Corporation does not adequately reflect the value of the target’s spectrum.
Sprint rejected the claim, referring to the…
Activist investor Crest Financial has commissioned a study to underline its claim that Sprint Nextel’s offer to buy Clearwire Corporation does not adequately reflect the value of the target’s spectrum.
Sprint rejected the claim, referring to the support it had received in December last year from Clearwire’s board.
The Crest commissioned study, by Information Age Economics (IAE), suggests that the true value of the spectrum owned by Clearwire is two or three times higher than the value reflected in Sprint’s US$2.97 per share offer.
Crest said Sprint’s offer represents US$0.21 per MHz-POP, while the IAE study concludes a more appropriate range would be US$0.40 to US$0.70 per MHz-POP.
The investor also noted the study concludes that Clearwire’s spectrum is of particular value to Sprint because its 2.5GHz band “is Sprint’s only remaining option to keep pace with such national competitors as Verizon, AT&T and T-Mobile”. Sprint’s US$2.97 offer would fail to take this into account.
Sprint dismissed the report, saying in an emailed statement to TelecomFinance: “As Clearwire’s proxy statement makes clear, after a rigorous and extensive two-year process of pursuing numerous strategic opportunities, including the sale of spectrum, Clearwire’s board and special committee unanimously recommended approval of Sprint’s definitive agreement to acquire Clearwire because it provides both the best value for shareholders and stability amid an uncertain future.”
Crest has previously said it plans to oppose Sprint’s proposal to acquire the rest of Clearwire, which requires approval from shareholders not affiliated with Sprint.
The activist investor, which owns 8.34% of Clearwire’s outstanding stock, has joined fellow minority investor Mount Kellett Capital Management in criticising Sprint’s offer as undervaluing the asset. Mount Kellett has said previously that the true value of Clearwire shares is around US$6.30 per share.
Crest has also sued Sprint and Clearwire’s board of directors. It alleges that they conspired to intentionally lower the value of Clearwire’s spectrum so that it could acquire Clearwire at an artificially depressed price.
Sprint faces a rival offer from Dish Network that is higher, at US$3.30 per share, but which also has a number of conditions attached to it. Clearwire’s board is still evaluating the bid and has so far not changed its recommendation in favour of Sprint’s offer.
Clearwire needs to draw on US$240m financing from Sprint – part of its US$2.97 offer – and secure up to US$250m in vendor financing this year.
Speaking on a conference call earlier this month the company’s CFO Hope Cochran said it needs to utilise vendor financing and the financing pledged by Sprint – in the form of convertible notes – to satisfy its operating, financing and capital spending for 2013.
In a previous SEC filing Clearwire said it would need to draw on US$240m of the total US$800m financing offered by Sprint as part of its buyout offer.
Clearwire has had to pass on two months worth of Sprint’s financing, amounting to US$160m, due to Dish’s rival offer.
Sprint, which is under offer from Softbank, hopes to close its acquisition of Clearwire in the summer. Softbank, which has agreed to buy 70% of Sprint, is also looking to close that transaction in the summer.
