US operator Sprint Nextel has offered US$2.90 per share to buy the remaining 49% of Clearwire, equalling US$2.1bn for the entire stake.
The company said in an SEC filing that on 12 December its board authorised discussions with Clearwire to reach a…
US operator Sprint Nextel has offered US$2.90 per share to buy the remaining 49% of Clearwire, equalling US$2.1bn for the entire stake.
The company said in an SEC filing that on 12 December its board authorised discussions with Clearwire to reach a definitive agreement for a potential merger.
According to the filing Sprint has also proposed to provide up to US$800m in interim financing to Clearwire.
In a separate filing Clearwire confirmed it had received an offer for Sprint, while analysts suggested Sprint’s offer might be too low. “We find it very unlikely that the remaining Clearwire shareholders will accept such a price,” said Wells Fargo analyst Jennifer Fritzsche in a note.
And BTIG’s Walter Piecyk said: “We believe Sprint will have to pay north of US$5.00 per share to the remaining shareholders in order to gain control”. He added that some of them might demand up to US$8.00 per share.
Trades above offer price
This view is supported by Clearwire’s share price which peaked at US$3.14 today – 8.28% above the offer price.
On 11 December when first information had leaked that Sprint was in discussions with Clearwire its shares closed at US$2.68.
Sprint itself is set to be acquired by Japan’s Softbank for US$20.1bn, expected to close in mid 2013. Before Softbank’s interest in Sprint became public, Clearwire shares were trading significantly lower – they closed at US$1.30 on 10 October.
The Softbank deal will provide Sprint with a significant war chest – it puts US$8bn on to its capital sheet – which will enable it to finance transactions and could help with the full takeover of Clearwire.
Clearwire’s spectrum is seen as a key strategic asset for Sprint as it looks to grow.
Since the Softbank deal was agreed Sprint has already increased its stake in Clearwire by close to 3% after buying 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. According to a Sprint shareholder agreement significant decisions, such as changes to c-level management or selling of assets, require approval by 10 board members.
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.
