SoftBank increases bid for Sprint to $21.6B to counter Dish

Japan's SoftBank increased its bid for Sprint Nextel (NYSE:S) by 7.5 percent to $21.6 billion in an effort to counter Dish Network's (NASDAQ:DISH) competing $25.5 billion bid for Sprint. However, in a blow to Dish's prospects to seal the deal, Sprint said it has ended talks with Dish and that the special committee of its board that is evaluating Dish's proposal found that it "is not reasonably likely to lead to a 'superior offer'" as defined in Sprint's agreement with SoftBank.

Sprint said that shareholder meeting that had been scheduled for June 12 to vote on SoftBank's proposal has been pushed back until June 25. Dish will have until June 18 to present its "best and final" offer.

Under the new terms of the agreement between Sprint and SoftBank, Sprint shareholders will get more money and Sprint will get less cash than originally proposed. Sprint shareholders will be paid $5.50 per share instead of $4.02. SoftBank will get shares from existing Sprint investors for $7.65 per share, up from the previous offer of $7.30. Sprint's stock closed Monday at $7.18.

At bottom, the new deal means that SoftBank will give Sprint shareholders $16.6 billion in cash and put $5 billion of new capital into Sprint for a 78 percent stake. Under the old deal, SoftBank would have given shareholders $12.1 billion in cash and pumped $8 billion in capital into Sprint for a 70 percent stake. That means that Sprint will have less money to play with to improve its network or buy spectrum.

"SoftBank and Sprint believe that the reallocation of primary capital to Sprint stockholders is warranted given the companies' refined operating and capital expenditures synergy expectations resulting from extensive due diligence over the past nine months, as well as Sprint's improving profitability and execution of its Network Vision plan," the companies said, in explaining the change in how the money from the deal will be allocated.

Under Dish's proposed offer, Sprint shareholders would receive $7 a share, of which $4.76 would be in cash. They would also get stock representing about 32 percent of the combined company. Reports have indicated Dish was lining up the committed financing for the deal, and, according to the Wall Street Journal, which cited unnamed sources, Dish and Sprint were in negotiations as late as last week. Importantly, SoftBank and Sprint changed the definition of "superior offer" to exclude "any proposal that is not fully financed pursuant to binding commitments from recognized financial institutions."

According to Reuters, SoftBank's latest proposal won the support of hedge fund Paulson & Co, Sprint's second-biggest shareholder, which had previously backed Dish bid. Paulson said it would vote in favor of SoftBank's new offer.

Sprint said that Dish never "put forward an actionable offer." The company said the special committee ended its discussions with Dish "and will request that Dish destroy all of the Sprint confidential information made available in the course of its diligence."

SoftBank CEO Masayoshi Son has argued that the offer made by Dish Chairman Charlie Ergen would have loaded the new company with too much debt and that Dish did not have enough expertise in the mobile industry to take control of Sprint. "We look forward to working with the Sprint management team to accelerate the build out of a nationwide LTE network, increase competition in the U.S. market and drive subscriber growth in the years ahead," Son said in a statement.

Dish said it would evaluate its options. "We continue to believe that Sprint has tremendous value," the company said in a statement. "We will analyze the revised SoftBank bid as we consider our strategic options." According to Reuters, which cited an unnamed source close to Dish, Dish is not likely to walk away, and the report noted that Ergen he could take on a bidding partner and even sell non-core assets to pay down debt if a bidding war for Sprint escalates.

"SoftBank is trying to assure its purchase," Tomoaki Kawasaki, a Tokyo-based analyst at Iwai Cosmo Holdings, told Bloomberg. "It already had a better bid. Raising its stake means SoftBank must have confidence it can revive Sprint's earnings."

New Street Research analyst Jonathan Chaplin wrote in a research note that the improved offer from SoftBank will likely win shareholder approval. "Dish may still come back with another offer; however, we think the odds of Dish winning at this point are relatively remote," he wrote.

Also at play is Dish's bid to buy Clearwire (NASDAQ:CLWR) for $4.40 per share, representing a 29 percent premium on Sprint Nextel's (NYSE:S) $3.40 per share offer to buy the roughly 50 percent of Clearwire it doesn't already own. Clearwire shareholders are still scheduled to vote on the Sprint proposal June 13. "Clearwire holders are likely to vote down the Sprint proposal of $3.40 on Thursday and therefore could once again get postponed," BTIG analyst Walter Piecyk wrote in a blog post. "We continue to believe Clearwire is a critical element of the Sprint Transaction."

For more:
- see this Sprint release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this AllThingsD article
- see this BTIG blog post (reg. req.)

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