Sprint to buy Clearwire for $2.2B

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Sprint Nextel (NYSE:S) and Clearwire (NASDAQ:CLWR) agreed to a transaction where Sprint will acquire the rest of Clearwire for $2.97 per share, or $2.2 billion. The figure is slightly more than the $2.1 billion bid Sprint proposed last week.

Click here for slides from Sprint and Clearwire's presentation for investors on the transaction.

The companies noted that Clearwire's board unanimously agreed to the deal. Some analysts and minority Clearwire investors last week indicated that Clearwire should hold out for a richer offer. The deal values Clearwire at $10 billion, including net debt and spectrum lease obligations of $5.5 billion.

Sprint CEO Dan Hesse said on a conference call with financial analysts that the deal will give Sprint a stronger spectrum portfolio with radio waves at low (800 MHz), medium (1900 MHz) and high (2.5 GHz) frequencies.

Hesse said the deal will allow Sprint to remain competitive in the U.S. wireless industry for years to come and will keep Clearwire's spectrum portfolio intact. That will allow Sprint to deploy a robust, capacity rich-network, he said.

"The sum of Sprint plus Clearwire is also a case where the whole is worth more than the sum of its parts," he said.

Clearwire said Comcast, Intel and Bright House Networks, which collectively own around 13 percent of Clearwire's voting shares, support the deal. Clearwire noted that the $2.97 per share offer is 40 percent higher than the $2.60 per share non-binding "indication of interest" Sprint made on Nov. 21; Clearwire rejected that offer. Softbank, which is in the midst of its own deal to acquire 70 percent of Sprint for $20.1 billion, also approved the transaction. A report last week from Reuters indicated that the $2.97 per share limit was as high as Softbank would allow Sprint to bid for Clearwire.

As Sprint indicated last week in a regulatory filing, it will give Clearwire up to $800 million in additional financing, subject to certain conditions including the approval of the proposed merger by Clearwire's shareholders and a network buildout plan. The companies said the deal is contingent on the Softbank deal closing, and they said they expect both deals to close by mid-2013.  

Clearwire CEO Erik Prusch said on the conference call that during the past two years Clearwire investigated several strategic options before determining that selling itself to Sprint was its best alternative. He said Clearwire tried to sign another major wholesale customer to complement Sprint, but that it was unable to do so, in part because it could not guarantee the potential partner the kind of ownership in Clearwire that it sought. He also said Clearwire "wouldn't be able to sell the company to another buyer even if another buyer existed."

Interestingly, Prusch said recently Clearwire entertained the idea of selling some of its spectrum to another player--which some analysts have speculated might have been Dish Network--but that the potential buyer did not want to pay enough money. He said Clearwire will reveal more details about how it came to accept the Sprint deal in a regulatory proxy filing, which will be filed in the next 45 days.   

Sprint is Clearwire's largest shareholder and by far its largest wholesale customer. Sprint's acquisition of Clearwire, if approved, would give Sprint complete control over Clearwire's TD-LTE network deployment, set for next year. Clearwire commands around 160 MHz of spectrum in the top 100 markets, and Sprint said its Network Vision network architecture would allow it to efficiently deploy TD-LTE.

For more:
- see this release
- see this presentation

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