Bloomberg News

Clearwire Investors Join Push for Higher Bid

January 18, 2013

More Clearwire Corp. (CLWR:US) shareholders have joined the chorus of investors asking Sprint Nextel Corp. (S:US) to raise its bid for the wireless-network operator after a counteroffer from Dish Network Corp. (DISH:US)

Glenview Capital Management, which owns about 28 million Class A shares, plans to reject Sprint’s current offer, according to a person with direct knowledge of the situation. Taran Asset Management, another Clearwire investor, will file a complaint with the Federal Communications Commission, arguing that Clearwire is worth more than Sprint’s bid, said Chris Gleason, a principal at the New York-based firm.

“Sprint has the ability to get the deal done if they increase their offer,” Gleason, whose firm owns 3 million shares of Clearwire, said in an interview. “To pretend they don’t have to raise their bid is silly.”

Sprint, which already owns just over 50 percent of Bellevue, Washington-based Clearwire, is attempting to buy the rest of the shares for $2.97 apiece. After Clearwire’s board agreed to the terms last month, Dish moved in with a $3.30-a- share offer. Sprint has argued that its bid is superior because it’s simpler and carries fewer conditions.

Even so, Sprint will need to increase the bid to persuade Clearwire investors to walk away from Dish’s offer, said the person familiar with Glenview’s thinking, who asked not to be named because the firm’s decision isn’t public.

Spectrum Value

The shareholders are the latest investors to join the rallying cry for a higher bid. Crest Financial Ltd., a Houston- based firm, asked the FCC to block the deal because it undervalues Clearwire’s spectrum -- the airwaves that let mobile devices connect to wireless networks. New York-based Mount Kellett Capital Management LP, meanwhile, sent a letter this week to Clearwire’s board asking them to consider Dish’s offer.

Mount Kellett has said it holds 53.2 million shares, or about 3.6 percent of the outstanding stock. Crest Financial owns 45.8 million shares, according to a Nov. 6 letter. There are 691 million Class A shares outstanding.

Clearwire rose 1 percent to $3.17 at the close in New York. The current price signals that investors expect a bid to go higher than Sprint’s $2.97 offer. Sprint rose 0.4 percent to $5.65.

“Sprint controls the show, and they could eliminate Dish’s involvement if they picked off some investors,” said Walt Piecyk, an analyst at BTIG LLC in New York. “But that would involve increasing their bid.”

Dish’s Strategy

Dish, the second-largest U.S. satellite-television provider, is making the bid as part of an expansion into mobile- phone service. Its proposal would require Clearwire shareholders to sell at least 25 percent of the stock and wouldn’t be dependent on Sprint’s participation, though it’s subject to conditions that may require Sprint’s approval.

Sprint, the third-largest U.S. wireless carrier, has said the matter is in the hands of the Clearwire special committee, which has accepted Sprint’s offer.

“We believe our offer is superior to Dish’s,” said Bill White, a spokesman for Overland Park, Kansas-based Sprint. “Dish has made a highly conditional proposal, so it’s not even possible to make a counteroffer to that.”

Dish, founded by billionaire Charlie Ergen, asked regulators yesterday to pause their review of a separate transaction -- Softbank Corp. (9984)’s $20 billion investment in Sprint.

Wait and See?

Sprint’s acquisition strategy depends on the cash infusion, and the Clearwire takeover is conditional on the deal with Tokyo-based Softbank going through. Dish, based in Englewood, Colorado, said the FCC should wait until the Clearwire situation evolves before acting.

Clearwire has made no decision on reconsidering Sprint’s offer, according to a statement last week. Clearwire said it plans to talk to Dish and will keep its options open by not drawing on financing offered by Sprint.

Sprint agreed to acquire 100 percent of its network partner Clearwire in December, two months after its deal with Softbank. The joint venture had struggled to build a nationwide wireless network over the past four years, leading to billions in losses for Clearwire.

Sprint plans to take over Clearwire’s spectrum and use it to enhance its own network. Sprint Chief Executive Officer Dan Hesse said last month that the deal was “critical” to turnaround efforts at the carrier.

Clearwire’s airwaves would be a prized possession for Sprint and Softbank, especially since it matches the spectrum Softbank already owns in Japan, Piecyk said. If Sprint does nothing, the company’s Clearwire takeover may not win a shareholder vote, he said.

“If Sprint loses, they hurt their chances to buy Clearwire, and it opens up the door for Ergen to grab a big chunk of spectrum,” he said.

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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