Dish Network has offered to buy Sprint Nextel for US$25.5bn, rivalling a US$20.1bn offer from Japan’sSoftbank for a 70% stake in the US telco last October.
The US DTH giant’s proposal consists of US$17.3bn in cash and US$8.2bn in…
Dish Network has offered to buy Sprint Nextel for US$25.5bn, rivalling a US$20.1bn offer from Japan’sSoftbank for a 70% stake in the US telco last October.
The US DTH giant’s proposal consists of US$17.3bn in cash and US$8.2bn in stock.
Sprint’s shareholders would receive US$4.76 and 0.05953 Dish shares for each Sprint share, the equivalent of US$7.00 per share. “The cash portion of our proposal represents an 18% premium over the US$4.03 per share implied by the Softbank proposal,” Dish wrote in a statement today.
Dish also said that its offer gives Sprint’s existing shareholders approximately 32% ownership in the combined Dish/Sprint versus Softbank’s proposal of a 30% interest in Sprint alone.
The DTH provider intends to fund the US$17.3bn cash portion of the transaction using US$8.2bn of cash from its balance sheet and the remainder through newly issued debt. Dish said its financial advisor, Barclays, was confident the company could raise the required financing. On an investor call, Dish said it was still looking at different ways to structure the debt, but said that the vast majority of it would be on the Sprint side of the combined business.
Presuming Sprint closes its proposed acquisition of wireless wholesaler Clearwire, Dish’s merger proposal would create a business generating US$50bn in revenues and US$9.4bn in EBITDA, based on 2012 figures and including potential synergies. Dish said after it acquired Sprint, it would have a net leverage ratio of 4.1x, and if that included Clearwire as well it would push the ratio to 4.7x.
In a statement Sprint said that its board planned to evaluate the proposal carefully.
In October last year, Japanese telco giant Softbank agreed to acquire 70% of Sprint for US$20.1bn, of which US$12.1bn would be paid to Sprint’s shareholders and US$8bn of capital would be put on to Sprint’s balance sheet.
Under the deal, Softbank would acquire 55% of Sprint’s stock for US$7.30 per share. The remaining 45% of the shares would be converted into equity of a new publicly traded entity, called New Sprint.
As part the agreement, Softbank will receive a US$600m break-up fee if a competing bidder comes in and acquires Sprint.
The deal was expected to close in mid-2013.
“My first take is that the Dish offer is stronger than Softbank’s both strategically and financially, and will force Softbank to strengthen its offer if it wants to win Sprint,” said Informa analyst Mike Roberts in a note.
In a memo, Wells Fargo senior analyst Jennifer Fritzsche commented: “While Ergen and his team clearly bring a better financial offer to Sprint shareholders and there are tangible synergies (unlike a Sprint/Softbank deal), we believe Sprint management still likely favours the dynamics of the Softbank transaction given Masayoshi Son’s experience with wireless and strong record in Japan.”
Approaches T-Mobile – report
Prior to its announcement about its Sprint offer, Dish had informally approached T-Mobile USA to discuss the prospect of merging, according to Bloomberg citing people close to the situation.
The move was reportedly made before T-Mobile’s parent Deutsche Telekom improved its offer for MetroPCS last week.
Deutsche Telekom may consider Dish’s proposal, but only after a MetroPCS deal is completed and after checking that a deal cannot be done with Sprint, the report said.
