US operator Sprint Nextel is in discussions to complete a takeover of wireless venture Clearwire, according to a variety of media reports.
Sprint currently owns a 51% stake in the business but, due to a previous shareholder agreement, does not have…
US operator Sprint Nextel is in discussions to complete a takeover of wireless venture Clearwire, according to a variety of media reports.
Sprint currently owns a 51% stake in the business but, due to a previous shareholder agreement, does not have management control.
A deal could be announced before the end of the year, CNBC reported. Significant discussions have taken place between Sprint and a number of Clearwire’s big shareholders aimed at purchasing their stock at roughly US$3.00 a share, according to CNBC that cited people familiar with the conversations. That would amount to Sprint paying around US$2.1bn for the remainder of the business.
Sprint is currently under offer from Softbank and the Japanese group’s CEO has said he wants the operator to challenge the US’s two biggest mobile operators, AT&T and Verizon.
Clearwire shares closed at US$2.68 yesterday. The company has a market capitalisation of US$3.9bn and roughly US$5bn of debt.
Before Softbank’s interest in Sprint became public, Clearwire shares were trading at less than half of what they are now – they closed at US$1.30 on 10 October.
Tech giant Intel, cablecos Comcast and Bright House Networks, and investment firms Mount Kellett and Crest Financial are among a number of companies that hold significant stakes in Clearwire.
In November Mount Kellett and Crest urged Sprint to declare its intentions with Clearwire, saying it should either make a tender offer for the whole company or allow the enterprise to sell off its excess spectrum to improve its capital profile. They valued the venture’s excess spectrum at between US$6bn and US$8bn.
They also claimed that Clearwire has a funding gap of over US$1bn and only has enough cash to fund its network build out program for another year.
The investors noted that a standstill agreement that stops Sprint from acquiring 100% of Clearwire without majority board and stockholder approval expires in late 2013.
The value to Sprint in Clearwire is in its spectrum holdings and the operator is working towards getting unfettered access to them.
The US$20.1bn Softbank transaction will give Sprint a significant war chest – it puts US$8bn on to its capital sheet – which will enable it to finance acquisitions.
Since the deal was agreed Sprint has already increased its stake in Clearwire by close to 3% after acquiring founder Craig McCaw’s stake for an amount just shy of US$100m.
This gave Sprint a 51% stake, but that is not enough to give it control of the company as it can only designate 7 of the 13 Clearwire board seats. A shareholder agreement means significant decisions, such as changes to c-level management or selling of assets, require approval by 10 board members.
According to the reports any deal for Clearwire would be conditional on the successful completion of Softbank’s 70% acquisition of Sprint stock.
That deal is currently undergoing regulatory approval and it is not expected to close until summer 2013.
