Dish Network Corp. (DISH), the satellite-TV provider controlled by billionaire Charlie Ergen, topped Sprint Nextel Corp. (S:US)’s bid for Clearwire Corp. (CLWR:US) in a move that may support its separate offer to purchase Sprint itself.
Dish offered $4.40 a share for Clearwire, or 29 percent more than Sprint’s earlier bid, the satellite company said yesterday in a statement. The deal would value all of the shares in Bellevue, Washington-based Clearwire, including the just over 50 percent stake held by Sprint, at about $6.5 billion.
The move creates fresh headaches for Sprint, which has been attempting to buy the rest of Clearwire since December. It increased its offer last week to $3.40 a share, seeking to satisfy a bloc of investors who oppose the deal. Dish, meanwhile, made a separate play for Sprint last month, offering $25.5 billion for the third-largest U.S. wireless carrier, rivaling a $20.1 billion bid from SoftBank Corp (9984).
“They are just trying to make it difficult for SoftBank to acquire Sprint and Clearwire,” said Chetan Sharma, an independent wireless analyst in Issaquah, Washington.
Clearwire shares jumped 29 percent to $4.50 at the close in New York in reaction to the Dish offer. SoftBank, based in Tokyo, fell 4.3 percent to 5,090 yen in Japanese trading.
Clearwire (CLWR), which had scheduled a vote on the Sprint takeover deal tomorrow morning, said in a statement that it plans to adjourn the shareholders meeting and reconvene it on June 13. Dish said today that it has commenced its tender offer for the company’s outstanding shares. The offer expires at the end of June 28.
“The special committee of Clearwire’s board of directors has received Dish network’s offer and will review it to determine the best course of action for the company and its stockholders,” Mike DiGioia, a Clearwire spokesman, said in a statement. “The special committee has not made any determination to change its recommendation of the current Sprint transaction.”
Dish is looking to buy all of Clearwire’s outstanding shares, though it would accept a deal for anything above 25 percent of the stock, according to its statement. The satellite company had previously bid $3.30 a share, leading Sprint to raise its offer last week. Dish’s courtship of both Sprint and Clearwire is part of a plan to expand beyond satellite TV into mobile services.
Dish has been interested in Clearwire for the past 18 months and views its airwaves as a good fit for its plans to deliver “differentiated services,” said Bob Toevs, a spokesman for Englewood, Colorado-based Dish.
“Our Clearwire offer in no way diminishes our interest or vision for a combined Dish/Sprint,” Toevs said. “We remain confident that we have presented the superior proposal to Sprint shareholders”
Sprint said it is looking at the Dish offers.
“We are reviewing Dish’s actions, both as to our interest in Clearwire, and Dish’s proposal to acquire Sprint,” said Scott Sloat, a spokesman for Overland Park, Kansas-based Sprint.
After Sprint increased its earlier bid, Clearwire shareholder Crest Financial Ltd. and a group of investors led by Mount Kellett Capital Management LP both rejected the new terms. They say the deal undervalues Clearwire and its wireless spectrum.
Crest sent a letter today urging Clearwire’s board to consider the Dish bid and other potential offers. Even at the higher price, Dish’s terms may still not pass muster, the Houston-based investment firm said.
“Although superior to Sprint’s current offer, Dish’s offer may turn out still to be inadequate for Clearwire’s stockholders,” Crest said. “As we have said repeatedly, the battle for Clearwire is just beginning. To ensure that this ensuing battle redounds to the benefit of all Clearwire stockholders, the board must create an open and transparent process whereby all interested parties can make offers to Clearwire’s stockholders.”
Dish’s latest move may prompt Sprint to sweeten the pot again, said David Weber, a Clearwire individual investor.
“It is obviously a better offer,” he said. “But I’d be surprised if Sprint doesn’t top that. It doesn’t sound like the bidding war is over.”
The fact that Dish raised its price by such a dramatic amount suggests Ergen may be trying to intimidate his rival, says Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor.
“Ergen is playing some fancy poker,” Gordon said. “Sprint raised Ergen’s bid by a dime. Ergen raised Sprint’s by a dollar. He’s forcing Sprint to make a big move or fold.”
Sprint could have staved off the Dish counterattack by offering a higher price in the first place, said Walt Piecyk, an analyst with BTIG LLC in New York.
“Sprint and SoftBank inexplicably left the door open and Charlie Ergen walked right through,” he said. “We have been saying for five months that it might take $5 per share to buy control of Clearwire and we finally might be getting there.”
Dish offered $25.5 billion for Sprint last month as part of a plan to expand into the mobile-phone business. SoftBank, Japan’s third-largest wireless carrier, agreed in October to buy a 70 percent stake in Sprint for $20.1 billion. As part of that transaction, SoftBank would give Sprint a cash infusion of $8 billion, helping it pay for Clearwire.
Staying the Course
Mitsuhiro Kurano, a spokesman for the Japanese company, declined to comment on Dish’s Clearwire bid. SoftBank has no plan to raise its bid for Sprint, he said.
“We believe our current plan can provide Sprint’s shareholders with good value,” he said today.
Still, the higher Dish offer for Clearwire may take away some of Sprint’s attractiveness to SoftBank, Gordon said.
“Ergen has wreaked havoc on the Clearwire shareholder vote,” Gordon said. “If he wins Clearwire, SoftBank has less reason to bid higher for Sprint.”
Ergen, who co-founded the satellite television company, has already assembled his own collection of airwaves that could be used with wireless devices, giving him something to pair with Clearwire’s spectrum.
“We are committed to completing a transaction that will permit Dish to commercialize its significant portfolio of wireless spectrum assets,” the company said yesterday in its letter to Clearwire.
Earlier this week, shareholder-advisory firm Glass, Lewis & Co. advised Clearwire investors to vote against the Sprint deal. Glass Lewis broke from Institutional Shareholder Services Inc. and Egan-Jones Ratings Co., which both endorsed Sprint’s earlier offer of $2.97 a share, citing Clearwire’s dim prospects as an independent company.
Clearwire has said it faces a cash crunch and needs at least $1.7 billion to keep operating, adding urgency to complete a deal. To help Clearwire stay afloat, Dish said yesterday it would provide financing of $80 million a month. That matches a similar program offered by Sprint.
Clearwire said today that it plans to make about $255 million of interest payments that are due June 1 on its first-priority, second-priority and exchangeable notes.
Sprint needs support from the majority of Clearwire’s Class A shareholders to gain control of the remaining 49 percent of Clearwire it doesn’t own. The move would wind down an ambitious joint venture with Clearwire that had attempted to build a nationwide wireless Internet network.
Begun in 2008, the project was backed by $3.2 billion in investments from Google Inc., Intel Corp. and cable-TV 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.
Ergen now sees the failed network as his opportunity to expand into wireless. While he doesn’t have SoftBank’s money, the billionaire is eager to do a deal, said Paul Sweeney, an analyst at Bloomberg Industries.
“He wants to be a player in the business,” he said.
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