Sprint Nextel Corp. (S:US) investors should abstain from voting on SoftBank Corp.’s $20.1 billion takeover proposal, shareholder advisory firm Glass Lewis & Co. said, putting pressure on the Japanese company to raise its bid.
Shareholders shouldn’t approve the measure while Sprint’s board is still evaluating a $25.5 billion counteroffer from Dish Network Corp. (DISH:US), the firm said yesterday. While shareholders are scheduled to vote on SoftBank’s bid on June 12, Sprint’s board is considering delaying the meeting as Dish works to firm up its offer, people familiar with the matter said.
SoftBank is seeking to take control of Sprint to vault the Tokyo-based company into the U.S. wireless market. After Sprint agreed to SoftBank (9984)’s deal in October, Dish came up with its own offer in April, saying it would combine its satellite-TV business with the third-largest U.S. mobile-phone carrier.
“Approval of the existing agreement would be premature,” Glass Lewis said in a report. “The interests of all shareholders would be best served by deferring judgement on the SoftBank transaction until such time as the board has provided clear disclosure around its view on the Dish proposal.”
Sprint is seeking a binding offer from Dish, rather than the preliminary bid it made in April, including details on financing sources, said the people familiar with the matter, who asked not to be identified because the talks are private.
The negotiations with Englewood, Colorado-based Dish may ultimately lead SoftBank to boost its offer, said Jennifer Fritzsche, an analyst with Wells Fargo & Co. in Chicago. Sprint shares fell 0.8 percent to $7.20 at the close in New York, though they remain well above the amount offered by either suitor. Dish said in April its deal would include $4.76 in cash and 0.05953 times each Dish share -- or $2.28 as of today’s close -- for each Sprint share.
Dish slid 1.3 percent to $38.30. SoftBank dropped 0.2 percent to 5,110 yen in Tokyo.
Sprint agreed May 20 to allow Dish access to private financial data, giving Dish information to build a stronger case for its proposal. As part of its merger agreement with SoftBank, Sprint has 40 days to hold a shareholder vote on the deal from the date that its proxy statement was sent to investors. The document was mailed around May 3, suggesting that Sprint may have to work with SoftBank to set a later date.
The report from Glass Lewis follows a recommendation in favor of SoftBank’s bid last week from Institutional Shareholder Services, the biggest shareholder advisory firm. ISS said it couldn’t weigh in on whether Dish’s offer was superior since no official proposal has been submitted to shareholders.
Another advisory firm, Egan-Jones Ratings Co., recommended last week that Sprint investors reject SoftBank’s proposal. SoftBank is probably preparing an improved offer, and Dish remains in talks with Sprint, so it’s best to hold out for now, Egan-Jones said.
Bob Toevs, a Dish spokesman, said his company is still negotiating with Sprint’s board and management, and working with the carrier to complete due diligence for the deal.
“We are confident Sprint will recognize the economic and strategic superiority of the Dish proposal,” he said. He didn’t immediately reply later yesterday to an e-mail seeking comment on Glass Lewis’s report. A SoftBank representative also didn’t immediately reply. Scott Sloat, a spokesman for Overland Park, Kansas-based Sprint, declined to comment.
Dish, the second-biggest U.S. satellite-TV provider, has waged a separate battle with Sprint for control of Clearwire Corp. (CLWR:US), the Bellevue, Washington-based wireless Internet company. Dish raised its bid May 29 for Clearwire shares to $4.40, 29 percent higher than Sprint’s offer, forcing Sprint to choose whether to counterbid and potentially affecting SoftBank’s plans.
Dish has lined up $9.3 billion in financing for the Sprint deal, people familiar with the matter said last month, though that isn’t yet part of a formal offer. Dish raised about $2.6 billion in a bond offering managed by Barclays Plc, Jefferies Group LLC, Macquarie Group Ltd. and Royal Bank of Canada. The satellite company also received separate loans from the same banks, as well as the Bank of Nova Scotia, the people said.
While Dish’s bid price is higher, SoftBank has argued that the deal would load Sprint with too much debt. SoftBank also is offering to provide Sprint with an $8 billion cash infusion, helping the carrier complete other deals, such as Clearwire.
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