Dish Network (NASDAQ: DISH) said it will not make a new offer for Sprint Nextel (NYSE:S) to counter SoftBank's revised $21.6 billion proposal to control 78 percent of Sprint. The move paves the way for SoftBank to complete its proposed purchase of Sprint.
Sprint last week accepted SoftBank's new proposal and said it had ended talks with Dish. Sprint had given Dish until Tuesday to present its "best and final" offer, and late on Tuesday Dish said that it was "impracticable" for Dish to meet the deadline.
"We will consider our options with respect to Sprint, and focus our efforts and resources on completing the Clearwire (NASDAQ:CLWR) tender offer," Dish said in a statement.
According to the Wall Street Journal, Dish can still submit a new bid for Sprint, but under the terms of Sprint's revised deal with SoftBank, Sprint can no longer terminate SoftBank's offer.
The action is a clear win for SoftBank CEO Masayoshi Son, who was forced to increase his company's bid for Sprint in order to counter Dish's $25.5 billion competing offer. SoftBank's new offer would give Sprint shareholders $16.6 billion in cash and would put $5 billion of new capital into Sprint for a 78 percent stake. Under its old deal, SoftBank would have given shareholders $12.1 billion in cash and would have pumped $8 billion in capital into Sprint for a 70 percent stake. Thus, Sprint could have less money to use to improve its network or buy spectrum.
"We look forward to receipt of the FCC and shareholder approvals, which will allow us to close in early July and begin the hard work of building the new Sprint into a meaningful third competitor in the U.S. market," SoftBank said in a statement.
Sprint's shareholders are set to vote on SoftBank's proposal June 25. However, Dish Chairman Charlie Ergen could still spoil that by making a late proposal of some kind, Michael Mahoney, senior managing director of Falcon Point Capital, told Bloomberg.
"He could do something to make the vote fail," Mahoney said. "They could say, 'Before you investors vote on this, be aware that I am going to bring a better offer.'"
If SoftBank is successful in purchasing Sprint, the focus will then turn to Clearwire, which has endorsed Dish's $4.40 per share tender offer for at least a 25 percent share in the company over Sprint's $3.40 per share to take control of the rest of Clearwire it does not already own. Clearwire shareholders are set to vote on June 24 on Dish's proposal. However, Sprint has sued to block the deal, arguing it violates Delaware law and Clearwire's governing structure. Dish has said Sprint's lawsuit "is a transparent attempt to divert attention from its failure to deal fairly with Clearwire's shareholders, as well as to exploit its majority position to block Clearwire's shareholders from receiving a fair price for their shares."
"We have been debating all week whether Dish is serious in its bid for Clearwire," wrote New Street research analyst Jonathan Chaplin in a research note. "The debate stems from the governance conditions, which may or may not be actionable, and the way the 25% condition is structured (25% of every conceivable share; including those that can't be tendered). We treat the bid as serious; however, we don't think Dish wants all or a stake in Clearwire; they do want 40 MHz of spectrum. Either way, we think the odds of Sprint winning the vote are close to zero and the odds of Sprint increasing their bid for Clearwire are pretty good." Chaplin said Clearwire's minority shareholders are well positioned to gain.
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
Sprint sues to block Dish's takeover of Clearwire
Previewing its Clearwire plans, Dish tests 50 Mbps fixed LTE service with nTelos spectrum
Clearwire chooses Dish instead of Sprint
If he can't buy Sprint, what is Ergen's plan B? (And C and D?)
SoftBank increases bid for Sprint to $21.6B to counter Dish