Sprint Chills to DISH, Sues Over Clearwire Offer

From DailyTech: Charlie Ergen, DISH Network Corp. (DISH) CEO, has met with silence a demand by Sprint Nextel Corp. (S) to sweeten his $25.5B* USD bid for majority ownership of the U.S. carrier. Sprint had given Mr. Ergen until June 18 to respond, calling his previous bid "not actionable".

DISH is offering $17.3B USD in cash, plus $8.2B USD in stock for a 68 percent stake in Sprint. However, Softbank Corp. (TYO:9984) -- who bid first -- raised its own offer to $21.6B USD, including $16.6B USD in cash, for a 78 percent stake in Sprint. While the DISH offer looks more attractive, analysts (and Sprint's management) seem to believe Softbank offers slightly better value due to its deep experience as an active wireless carrier.

Mr. Ergen, who owns large amounts of spectrum and has long been rumored to be considering the launch of a fifth major carrier in the U.S., while refusing to up his bid did make an aggressive move. He raised his bid for Clearwire Corp. (CLWR), the wireless broadband firm who sells service to Sprint.

DISH and Sprint have been locked in a bidding war over Clearwire, but DISH's bid has been largely considered unlikely to pass due to onerous debt/equity swap conditions and commercial agreements. As of Feb. 2013 Sprint was offering $2.97 USD/share for Clearwire, while DISH was offering $3.30 USD/share.

Since DISH has bumped its offer by a third to $4.40 USD/share, while Sprint has bumped its offer only 14 percent to $3.40 USD/share. As DISH has sweetened its bid, investors are starting to take the offer seriously. Last week Clearwire's board urged shareholders to accept the offer, which will soon be put to a vote.

Sprint responded this week by filing a suit in the Delaware Court of Chancery. Sprint claims the DISH bid is illegal as it violates Clearwire's Equity Holders Agreement (EHA), which requires tender offers to be approved by 75 percent of shareholders. As Sprint, who has "invested billions" in Clearwire, controls half the company, that's not going to happen.

Further, the lawsuit is based on part of DISH's terms, which would place a number of DISH designees on the company's board. The EHA states that Sprint gets to nominate 7 board members, the Significant Investors Group gets to nominate 4, and the remaining 2 board members.

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