US telco Sprint Nextel has ended takeover talks with DTH giant Dish Network as it received an improved offer from Japan’s Softbank.
Sprint’s board said Dish’s US$25.5bn bid is “not actionable”, calling on the satellite broadcaster to destroy…
US telco Sprint Nextel has ended takeover talks with DTH giant Dish Network as it received an improved offer from Japan’s Softbank.
Sprint’s board said Dish’s US$25.5bn bid is “not actionable”, calling on the satellite broadcaster to destroy due diligence files after failing to make progress.
However, Dish struck a defiant note as it claimed it continued to believe Sprint has “tremendous” value.
“We will analyse the revised SoftBank bid as we consider our strategic options,” it said in a short statement.
Softbank upped its offer for Sprint by US$1.5bn, from US$20.1bn to US$21.6bn, as it changed the balance of its proposal by giving shareholders more cash and less equity. The new merger agreement gives Sprint’s shareholders an extra US$4.5bn in cash, with investors set to receive US$5.50 per share rather than US$4.00. But to offset this Softbank is reducing its equity consideration by US$3bn.
If the new bid is successful, the Japanese telco would hold 78% of Sprint post takeover, up from 70% in its first bid from last October.
Sprint shareholders were set to vote on Softbank’s proposal tomorrow, but that has been put back to 25 June so there is time to digest the new offer.
Hedge fund Paulson & Co, Sprint’s second largest shareholder that had been backing Dish’s rival bid, has now come out in favour of Softbank’s new offer.
As part of the agreement, Softbank will receive an US$800m break-up fee if a competing bidder comes in and acquires Sprint. This figure stood at US$600m in Softbank’s first offer.
Jonathan Chaplin, an analyst at New Street Research, said: “We believe this probably gets it done.”
He said that, while Softbank’s new offer is only a small premium on Dish’s, it has the advantage of being “reliable”.
Nomura analyst Mike McCormack also thought the new offer was likely to gain traction.
“Barring a raised bid from Dish, we expect opposition to this new offer to be limited,” he said.
Dish gets the cold shoulder
In backing Softbank’s offer, Sprint’s special committee said the proposal Dish made in April was not likely to result in a superior offer.
Larry Glasscock, chairman of the Sprint’s special committee, said: “We have expended substantial time and energy engaging with Dish over the past nine weeks, including an extensive due diligence process, but these efforts did not lead, in the special committee’s view, to a proposal that was reasonably likely to lead to a proposal superior to Softbank’s.”
In a revised merger plan agreed by the boards of both Sprint and Softbank, Dish has a deadline of 18 June to put forward its “best and final” offer.
Their new agreement also alters the definition of a “superior offer”, which now excludes “any proposal that is not fully financed pursuant to binding commitments from recognised financial institutions”.
New Street Research’s Chaplin said: “Dish may still come back with another offer; however, we think the odds of Dish winning at this point are relatively remote.”
“We acknowledge that trying to anticipate what Dish will do next is difficult – Ergen is a master tactician with an unbounded ability to surprise.”
