Sprint/SoftBank deal gets mixed reviews from advisory firms

SoftBank's $20.1 billion bid to gain control of 70 percent of Sprint Nextel (NYSE:S) won approval from a key shareholder advisory firm, Institutional Shareholder Services, but did not get the backing from another firm, Egan-Jones Ratings Co., which reversed its position and now opposes the offer in light of Dish Network's (NASDAQ: DISH) $25.5 billion counterbid.

ISS said SoftBank's price was fair and that Sprint shareholders should approve the deal; as of now, Sprint shareholders are set to vote on the SoftBank proposal June 12. "Given the strategic merits of the SoftBank transaction, the sales and negotiation process overseen by the board, the strength of the valuation relative to precedent transactions, and the market reaction, a vote for the transaction is warranted," ISS said in its report.

Importantly, ISS did not take a position on Dish's offer because it has not been formally presented to shareholders. "Given the preliminary nature of the Dish offer--and in particular that shareholders may not themselves affirmatively choose that offer over the SoftBank transaction, as Dish has not yet made its offer directly through a tender--ISS has not developed a view," the firm said.

Dish has been working to line up the committed financing it needs to purchase Sprint, but the SoftBank/Sprint proposal is moving steadily ahead. Last week Sprint and SoftBank received approval from the Committee on Foreign Investment in the United States, clearing a key hurdle in a review of the deal's national security implications. The FCC still needs to approve the deal.

While the Sprint/Softbank transaction is gaining momentum, it was handed a setback from Egan-Jones, which changed its mind about supporting the deal. The firm said in a report that it now thinks SoftBank will likely need to improve its offer for Sprint. Thus, "it would be unwise at this time for the company's shareholders to approve the merger agreement with SoftBank in its current form," the firm said.

Sprint praised ISS's report and downplayed the one from Egan-Jones, with Sprint spokesman Scott Sloat telling Bloomberg that the carrier "remains focused on finalizing its signed merger agreement with SoftBank, which has been recommended by our board of directors."

"SoftBank can't rely on an ISS recommendation to get their deal done," BTIG analyst Walt Piecyk told Bloomberg. He said SoftBank needs "to take control of the situation" and improve "both the Sprint and Clearwire offers soon to use the upcoming vote dates to their advantage."

Meanwhile, in the battle between Sprint and Dish over Clearwire (NASDAQ:CLWR), Sprint fired back at Dish's $4.40 per share offer to buy Clearwire, which it announced last week to top Sprint's $3.40 per share bid to take control of the roughly 50 percent of Clearwire it does not already own. In a letter to Clearwire's board, Sprint said Dish's latest offer is "not actionable" because certain provisions violate Delaware law, Clearwire's certificate of incorporation or the rights of companies under existing Clearwire Equityholders' Agreement (EHA), including Sprint.

"Sprint will not vote in favor of the proposal, tender its shares in the offer or waive any of its rights as a stockholder or under the EHA," Sprint CEO Dan Hesse wrote in the letter. "Sprint will enforce its legal and contractual rights. Thus, the Dish proposal is not actionable."

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."

A Dish spokesman did not immediately have a comment on Sprint's letter.

For more:
- see this WSJ article (sub. req.)
- see this NYT article
- see this Bloomberg article
- see this separate Bloomberg article
- see this Sprint release

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