Dish Network Corp. (DISH:US) may face an additional $1.2 billion expense in wresting Sprint Nextel Corp. (S:US) from rival bidder SoftBank (9984) Corp. following an amended convertible bond agreement.
SoftBank bought the seven-year bond (S:US) from Sprint at the time of its initial bid in October, an investment it wasn’t initially permitted to sell without Overland Park, Kansas-based Sprint’s consent, according to regulatory filings. This week, the two amended the terms on the debt so the suitor has the right to sell the bond back if it loses out to Dish.
Before today, Sprint had risen by almost one-third since agreeing to a $20.1 billion bid from SoftBank, which was later sweetened. That would leave Dish having to pay $1.2 billion more than SoftBank paid, the filings show, based on the 30-day trading average of Sprint’s stock. That cost is the latest in a string of obstacles for Dish Chairman Charles Ergen, who has spent the past two months jostling with SoftBank for control of the third-biggest U.S. wireless carrier.
In October, Sprint issued $3.1 billion of convertible debt to SoftBank, which intended to swap the debt for about 590.5 million shares. The difference between the initial conversion price of $5.25 and the current trailing price of about $7.30 represents the potential extra cost Dish would face to repurchase the securities.
Dish, based in Englewood, Colorado, made an unsolicited bid to acquire Sprint in April, which was valued at about $7 a share. The bid includes $4.76 cash and 0.05953 Dish share for each Sprint share. Dish faces a June 18 deadline to submit a new bid after SoftBank increased its own offer this week to about $7.65 a share.
The amendment to the bond-purchase agreement coincides with Sprint’s decision to implement a shareholder rights plan, or poison pill, to prevent Dish from turning hostile and accumulating the majority of Sprint shares. Sprint and Tokyo-based SoftBank also agreed to boost the breakup fee on the deal to $800 million from $600 million.
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