Sprint Nextel Corp. (S:US), trying to ward off a Dish Network Corp. (DISH:US) counteroffer for takeover target Clearwire Corp. (CLWR:US), said the Dish bid isn’t “actionable” because it would break the law and Clearwire’s equity holder agreement.
“Several rights demanded by Dish, including a contractual agreement to designate at least three Clearwire board members and the right to veto certain Clearwire actions, are violations of the EHA or Delaware law,” Overland Park, Kansas-based Sprint said today in a statement.
Dish, the satellite-TV provider controlled by billionaire Charlie Ergen, topped Sprint’s bid for Clearwire last week by 29 percent. Dish offered $4.40 a share, compared with Sprint’s $3.40 price. Dish’s deal would value all of the shares in Bellevue, Washington-based Clearwire, including a stake already held by Sprint, at about $6.5 billion.
Sprint, which owns slightly more than 50 percent of Clearwire, has been attempting to buy the rest since December. It increased its offer last month to $3.40 a share, seeking to satisfy a bloc of investors who oppose the deal. A full takeover of Clearwire would let Sprint tap the company’s wireless spectrum, helping the third-largest U.S. mobile-phone carrier bolster its network.
“It’s hard to see how Dish gets it done,” said Jennifer Fritzsche, an analyst with Wells Fargo & Co.
Bob Toevs, a spokesman for Englewood, Colorado-based Dish, declined to comment.
Crest Financial, the largest independent minority Clearwire shareholder, opposes the Sprint deal and said again today that it wants an “open, competitive” bidding process for Clearwire.
Clearwire shares (CLWR:US) fell 1.3 percent to $4.42 at the close in New York. The stock has climbed 53 percent this year, lifted by the bidding war.
Dish kicked off the takeover fight in January when it bid $3.30 a share for Clearwire, topping Sprint’s $2.97 price. The satellite company then made a bid for all of Sprint in April, offering $25.5 billion for the carrier in an effort to expand into the mobile-phone business. Dish said last week that its pursuit of Clearwire doesn’t diminish its interest in merging with Sprint.
Clearwire, which had scheduled a vote on the Sprint takeover deal for May 31, adjourned the meeting and said it would reconvene on June 13. A special board committee is studying the Dish offer.
“The special committee noted that while the most recent Dish proposal raises issues that need to be discussed with Dish, the proposal appears to be more actionable than Dish’s previous proposal,” Clearwire said in a statement on May 30.
Sprint disputed that idea today, pointing to the law in Delaware, where Clearwire is incorporated. Dish’s proposal depends on obtaining at least 25 percent of Clearwire’s shares and would let the satellite company appoint three or more directors to the board.
“Clearwire’s granting the governance rights required by Dish would effectively require Sprint to give up certain bargained-for rights in clear violation of Delaware law,” Sprint Chief Executive Officer Dan Hesse said in the statement.
The deal also would violate an equity holders’ agreement forged in 2008 when Clearwire was created as a joint venture between Sprint and other companies. The rules wouldn’t allow the Dish offer to proceed, Sprint said.
“Having invested billions, I am sure you understand why Sprint is not willing to give up rights that were fundamental to the investment it made,” Hesse said.
Mike DiGioia, a Clearwire spokesman, acknowledged the Sprint letter today and said his company is still analyzing the Dish proposal.
“The special committee has not made any determination to change its recommendation of the current Sprint transaction, and we will have no further comment until they have finished their full review,” DiGioia said.
Dish has implied they are open to some sort of partnership, while at the same time maneuvering against Sprint for more control of Clearwire, said Fritzsche.
“Dish has done an amazing job of creating options for itself, so I don’t want to say it, but it looks like they’ve been out-lawyered,” she said.
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