Dish Network (NASDAQ: DISH) increased its offer to buy Clearwire (NASDAQ:CLWR) to $4.40 per share, representing a 29 percent premium on Sprint Nextel's (NYSE:S) $3.40 per share offer just days ahead of a meeting where Clearwire shareholders are expected to vote on Sprint's proposal. The new offer also comes amid continuing resistance from minority Clearwire shareholders to Sprint's offer, a bid it improved form $2.97 per share, which they say still undervalues the company.
Dish said it made its proposal public because of the time constraints; Clearwire shareholders are scheduled to vote on Sprint's proposal on Friday. Dish said it would commence a tender offer for the outstanding Clearwire shares prior to that meeting. In a letter to Clearwire Chairman John Stanton, Dish Chairman Charlie Ergen said Dish has "simplified and improved our previous proposal to provide you with revised terms that are both clearly actionable by Clearwire and unmistakably superior to the Sprint proposal. Importantly, we are prepared to de-link our proposed acquisition of 40 MHz of your BRS and EBS spectrum from the offer we will make to your stockholders."
According to a Reuters article, which cited unnamed sources familiar with the matter, Clearwire is expected to postpone the Friday shareholder meeting in light of Dish's newest proposal. A Clearwire spokesman declined to comment on the report.
Dish's offer values Clearwire at $6.3 billion to $6.5 billion. Clearwire's shares shot up as much as 22 percent to $4.23 per share in late trading after the offer was disclosed.
Importantly, 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 is prepared to give Clearwire funding that would allow Clearwire to draw up to $80 million per month until the total amount provided (together with any amounts funded by Sprint under its exchangeable notes purchase agreement) equals $800 million.
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 Clearer enters into with other companies, including Sprint, unless such deals are approved by "an independent and disinterested board committee."
"The special committee of Clearwire's board of directors has received Dish Network's offer and will review it to determine the best course of action for the company and its stockholders," Clearwire spokesman Mike DiGioia said in a statement. "The special committee has not made any determination to change its recommendation of the current Sprint transaction."
The dueling between Dish and Sprint comes as Dish is trying to acquire Sprint itself for $25.5 billion, in competition with Japan's SoftBank, which has made a $20.1 billion offer to acquire 70 percent of Sprint. The Sprint/SoftBank transaction has received approval from the Committee on Foreign Investment in the United States, an interagency body headed by the Treasury and charged with overseeing deals in which a foreign entity gains control of a U.S. company. Sprint shareholders are scheduled to vote on the SoftBank deal June 12.
"They are just trying to make it difficult for SoftBank to acquire Sprint and Clearwire," wireless analyst Chetan Sharma told Bloomberg.
Analysts said Dish is playing a game of brinkmanship with an eye on either getting Sprint to bid more or getting some of Clearwire's spectrum. "As we review the potential responses from Sprint: 1) Dish doesn't benefit if Sprint outbids them (Dish owns Clearwire debt; not equity, as far as we know); 2) Dish gains little with a minority stake in Clearwire; 3) We doubt Dish wants all of Clearwire; 4) We know they want 40 MHz of spectrum and this revised bid could provide them with the leverage to get it," wrote New Street research analyst Jonathan Chaplin. "We believe Dish will have to increase their offer for the spectrum materially in order for Clearwire to deem a spectrum sale superior to a sale of the entire company (Clearwire would have to terminate the merger agreement with Sprint to sell spectrum to Dish…unless Sprint approves the sale)."
As Clearwire pointed out Wednesday in response to proxy advisory firm Glass, Lewis & Co.'s recommendation to vote against Sprint's $3.40 per share offer, "Clearwire cannot be sold to another party without Sprint's approval. It has been well documented that Sprint is not a willing seller."
"It is obviously a better offer," Clearwire individual investor David Weber told Bloomberg of Dish's latest proposal. "But I'd be surprised if Sprint doesn't top that. It doesn't sound like the bidding war is over."
- see this Dish release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
Clearwire shareholder Crest seeks to disrupt tally ahead of Sprint vote
Sprint increases its offer for Clearwire, hopes to stave off Dish
Sprint's Clearwire offer gets conflicting reviews from shareholder advisory firms
Clearwire urges shareholders to approve Sprint's buyout offer
SoftBank CEO sees no need for Sprint to raise Clearwire offer
Clearwire confirms Verizon bid for spectrum, still aims for Sprint deal