Clearwire Corp. (CLWR:US), the object of a takeover contest, has decided to take at least $80 million in financing from Sprint Nextel Corp. (S:US) next month, a decision that may hinder a rival bid from Dish Network Corp. (DISH:US)
The money is part of a 10-month, $800 million financing offer that Sprint extended to Clearwire when it agreed to buy out the company’s shares in December for $2.97 apiece. Clearwire hasn’t decided if it will take more than one month of payments, though it has already lost the right to draw on the January and February installments, according to a statement today.
While the move would increase Sprint’s stake in the company, Clearwire said it’s still in discussions with Dish, which counteroffered Sprint’s bid with a $3.30-a-share deal in January. The financing is taking the form of exchangeable notes, which Sprint can convert into Clearwire stock at $1.50 each under certain conditions.
Today’s move may force Dish co-founder Charlie Ergen to respond, said Walt Piecyk, an analyst with BTIG LLC in New York. Clearwire’s minority investors also have been lobbying for a better offer than Sprint’s deal. By taking the Sprint financing, Clearwire is signaling that it’s moving closer to accepting the original offer.
“The ball now moves into Charlie’s court,” Piecyk said. “Either he modifies his offer or backs off to see how the minority shareholder vote goes.”
Sprint, which already owns slightly more than 50 percent of the money-losing company, is attempting to buy out the rest of the shares so that it can use Clearwire’s airwaves to bolster its own network. While Dish offered a higher price, that bid is more complex and may require Sprint’s consent to be completed.
Dish has said that its proposal would require Clearwire to terminate its financing agreement with Overland Park, Kansas- based Sprint. Bob Toevs, a spokesman for Englewood, Colorado- based Dish, declined to comment today.
The Dish proposal is a nonbinding agreement, giving Dish the ability to modify the terms or even take it to court, Jennifer Fritzsche, a Wells Fargo & Co. analyst, said in a note.
“We believe Dish can pursue litigation if it chooses, given its bid of $3.30 a share is about 10 percent higher than Sprint’s bid,” Fritzsche said.
Shares of Bellevue, Washington-based Clearwire fell less than 1 percent to $3.18 at the close in New York today. The stock (CLWR:US) has climbed 10 percent this year, signaling that investors expect Clearwire to fetch a higher price than Sprint’s $2.97 offer. Sprint, the third-largest U.S. wireless carrier, advanced 1.4 percent to $5.86 today.
The takeover bid for Clearwire followed a separate deal between Sprint and Tokyo-based Softbank Inc., which is buying a 70 percent ownership in the carrier for $20 billion.
Sprint and Clearwire had forged a joint venture in 2008 to build a nationwide wireless network, backed by $3.2 billion in investments from Google Inc. (GOOG:US), Intel Corp. and cable companies. After losses piled up, partners such as Google and Time Warner Cable Inc. (TWC:US) sold their stakes for a fraction of their original value.
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