Analysts: SoftBank could 'walk away' from Sprint following Dish's bid for Clearwire

Clearwire (NASDAQ:CLWR) postponed a shareholder vote set for today on Sprint Nextel's (NYSE:S) $3.40 per share offer to take control of the company in the wake of Dish Network's (NASDAQ: DISH) revised $4.40 per share counterbid. Dish's offer, a 29 percent premium on Sprint's bid, shakes up yet again a complex and shifting series of maneuvers among various wireless players, and could complicate SoftBank's bid to acquire control of Sprint, according to analysts.

Indeed, some see cracks in SoftBank's position due to Dish's latest move.

"We think there is now a chance that SoftBank walks away from the Sprint deal," Macquarie analysts said in a note, according to the Wall Street Journal. "We do not believe that SoftBank will close on Sprint without the Clearwire deal being approved by shareholders, and with Dish as a large minority holder."

Clearwire said in a statement it will adjourn today's shareholder meeting and postpone it until June 13. In the meantime, the special committee of its board evaluating deals will consider Dish's proposal and engage in negotiations with Dish, as it considers whether to recommend Dish's offer. Clearwire said that Dish's new proposal "appears to be more actionable" than its previous one. However, the special committee has not yet changed its decision to recommend Sprint's offer.

Dish said in a statement that it had formally commenced its tender off for Clearwire. Tom Cullen, Dish's executive vice president of corporate development, also said in a statement that Dish is "confident that our offer is superior to the proposed Sprint merger as it offers substantially greater value to Clearwire and its minority stockholders and a clearer path to value realization for all parties. Importantly, it also provides a meaningful alternative to the significant group of Clearwire minority stockholders that remains opposed to the Sprint merger."

Crest Financial, a minority Clearwire shareholder that holds 8 percent of Clearwire's stock and that has been fighting a proxy battle against Sprint's takeover bid, recommended that Clearwire's shareholders reject Sprint's offer in favor of Dish's bid. While Dish said its offer is for all Clearwire shareholders including majority owner Sprint, it is willing to buy out only minority shareholders as long as it can acquire at least 25 percent of Clearwire's voting stock. Dish said it wants the right to pick at least three Clearwire board members and more if it acquires more of Clearwire's shares. Dish also wants the right to approve changes to Clearwire's structure as well as transactions Clearwire enters into with other companies, including Sprint, unless such deals are approved by "an independent and disinterested board committee."

Financial analysts scrambled to try and make sense of the shifting landscape, and what Dish's new bid for Clearwire means for Dish's $25.5 billion bid to buy Sprint. Dish's bid for Sprint is a counter to SoftBank's $20.1 billion offer for 70 percent of Sprint.

The focus is now on SoftBank and what its response will be. Will Sprint up its bid for Clearwire (Sprint's bid for Clearwire is contingent on the consummation of SoftBank's purchase of 70 percent of Sprint) or will SoftBank increase its offer for Sprint itself?

SoftBank CEO Masyoshi Son has said repeatedly during the past several weeks that his company's offer remains superior to Dish's, especially in terms of the amount of synergies it can produce and because SoftBank has direct experience running a wireless business, which Dish does not. The FCC still needs to approve the Sprint/SoftBank deal, and Sprint shareholders are currently set to vote on SoftBank's offer June 12, the day before Clearwire's vote.

BTIG analyst Walter Piecyk told Reuters that SoftBank should come up with a higher bid for Sprint soon, since Dish's counterbid for Clearwire effectively reduces the value of SoftBank's bid for Sprint. "If Masa doesn't figure out how to regain control of the Clearwire process he may have a much harder time convincing Sprint shareholders that his Sprint offer is superior to [Dish Chairman Charlie] Ergen's," Piecyk said.

Dish said its bid for Clearwire isn't at the expense of its bid for Sprint. "Our Clearwire offer in no way diminishes our interest or vision for a combined Dish/Sprint," a Dish spokesman told Reuters.

Analysts at J.P. Morgan agreed with that view, according to the Journal. "We view it instead as Dish attempting to de-value the SoftBank bid by injecting itself into Clearwire as a permanent, and likely vocal, minority shareholder long term," the analysts wrote. "The value to Dish here is that if the Sprint board chooses the SoftBank bid it knows going in that SoftBank and Sprint will have to deal with a recalcitrant minority in Clearwire that could frustrate Sprint's long-term plans."

For more:
- see this Clearwire release
- see this Dish release
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Reuters article

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