US wireless operator Sprint Nextel has come to a new agreement to acquire the remaining shares in Clearwire Corporation that surpasses a proposal from Dish Network and gives the target an enterprise value of US$14bn.
Sprint has bid US$5 per share, a…
US wireless operator Sprint Nextel has come to a new agreement to acquire the remaining shares in Clearwire Corporation that surpasses a proposal from Dish Network and gives the target an enterprise value of US$14bn.
Sprint has bid US$5 per share, a 14% premium on Dish’s US$4.40 tender offer put forward earlier this month. Clearwire’s special committee has recommended the latest offer, retracting its endorsement of Dish’s proposal.
This is the third time Clearwire has recommended a bid from Sprint. Previous offers were subsequently countered by higher bids from Dish.
This time around Sprint has said it has won support from a number of the smaller investors, which had previously been against the operator’s takeover attempt.
These shareholders include Mount Kellett Capital Management, Glenview Capital Management, Chesapeake Partners Management and Highside Capital Management. They represent 9% of Clearwire’s voting shares; the firms will sell their shares to Sprint even if the operator’s latest merger agreement fails.
Together with commitments it has already received from a group of companies holding 13% of the wireless internet provider, and stock from Clearwire directors and officers, Sprint said it has support from 45% of the minority shareholders. It needs 50% of them to support its latest offer to get a deal done.
“Sprint expects a majority of the non-Sprint stockholders to support the Clearwire merger based on these agreements and the votes of shareholders with both Sprint and Clearwire shareholdings who have already voted in favour of the Sprint/Softbank transaction,” the operator said in a statement.
Sprint and Clearwire have also added a US$115m break-up fee to the agreement, which Clearwire would have to pay to Sprint in the event that the transaction terminates.
Sprint first agreed a deal with Clearwire last December, which would have seen it pay US$2.97 for each outstanding share – its latest US$5 offer represents a 68% premium on its initial offer.
Clearwire’s shareholder vote scheduled for 24 June has been pushed back to 8 July. By then Sprint shareholders should have voted on Softbank’s US$21.6bn takeover bid. Sprint’s acquisition of Clearwire is contingent on that deal closing, but the Japanese telco is now in pole position after Dish, which had made a play for Sprint, left the process.
Dish is now redeeming notes, which would have gone towards its proposed US$25.5bn merger.
Analysts were of the view that Sprint’s latest offer would get the deal done. In a note New Street Research analyst Jonathan Chaplin said that the committed backing from 45% of Clearwire’s minority shareholders made “the likelihood of approval very high”.
“We don’t see how Dish can break up this deal now … We think this deal is done (at last),” he said.
BTIG Research analyst Walter Piecyk agreed that a deal would now be approved by shareholders and added that it would get done “regardless of any new overtures from Dish”.
He concluded by commenting: “If Softbank can gain Sprint shareholder approval next week and gain FCC approval it will launch a formidable new competitor into the US Wireless industry and jump start the development of a 2.5/2.6 GHz ecosystem and TDD-LTE.”
Wells Fargo analyst Jennifer Fritzsche pointed out in a memo that Dish’s previous tender offer would not be actionable now, even if it raised its offer.
“We would note that Dish cannot acquire 25% of total shares by its definition following today’s announcement, but this does not preclude Dish from changing its offer and eliminating the 25% minimum tender requirement or modifying its offer entirely.”
Citigroup is financial advisor to Sprint while Skadden, Arps, Slate, Meagher & Flom and King & Spalding act as counsels.
Clearwire is advised by Evercore Partners, while Kirkland & Ellis is its counsel.
Clearwire’s special committee was financially advised by Centerview Partners with Simpson Thacher & Bartlett and Richards, Layton & Finger acting as counsels. Blackstone Advisory Partners advises Clearwire on restructuring matters.
