Sprint Nextel (NYSE:S) sued both Dish Network (NASDAQ: DISH) and partner Clearwire (NASDAQ:CLWR) to block Dish's proposed $4.40 per share takeover bid of Clearwire. Clearwire said last week that its board recommended that shareholders approve Dish's offer over Sprint's $3.40 per bid to take control of Clearwire, but Sprint has argued Dish's offer is "not actionable."
Sprint filed its complaint in the Delaware Court of Chancery, arguing that Dish's bid violates Delaware law and the rights of both Sprint and other strategic investors in Clearwire under Clearwire's charter and the company's Equity Holders Agreement ("EHA"). Sprint said the suit "details how Dish has repeatedly attempted to fool Clearwire's shareholders into believing its proposal was actionable in an effort to acquire Clearwire's spectrum and to obstruct Sprint's transaction with Clearwire."
In a statement, Dish 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. Dish is confident that its superior offer, which has been unanimously recommended by the Clearwire board, including the majority appointed by Sprint, will be upheld and Clearwire shareholders will be free to realize the 29 percent premium represented by the Dish offer."
Earlier this month Dish sought to refute many of the claims Sprint is making in its lawsuit. Clearwire spokesman Mike DiGioia declined to comment.
Sprint argued that due to the corporate structure Clearwire set up in 2008, Dish's tender offer for Clearwire cannot be completed without the approval of holders of at least 75 percent of Clearwire's outstanding stock, nor without the approval of Comcast, neither of which has been obtained. "Completion of the tender offer without such approvals is unlawful," Sprint said. Sprint also argued that the changes in governance Dish is seeking would violate the EHA, and that Dish's offer is "unlawfully coercive" because it threatens to leave shareholders that don't go along "holding shares in a company subject to governance deadlocks or substantial damage awards to Dish" if Clearwire can't fulfill the terms of the deal.
Dish's offer is for all Clearwire shareholders, including majority owner Sprint, but Dish has said 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 the funding necessary to keep the company afloat financially--Dish said Clearwire can 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. Clearwire has taken similar funding payments from Sprint this year.
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."
Clearwire shareholders are scheduled to vote on Dish's bid on June 24, one day before Sprint shareholders are set to vote on SoftBank's proposal to buy Sprint, which Dish is also competing against. Dish also announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act in connection with the tender offer for Clearwire.
- see this release
- see this Bloomberg article
- see this Reuters article
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this CNET article
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