June 4, 2013
Sprint Nextel Corp. raised objections over Dish Network Corp.'s tender offer to acquire Clearwire Corp., saying the bid is "not actionable", continuing the complicated drama over control of the mobile broadband provider that is majority-owned by Sprint.
In a letter to Clearwire's board Monday, Sprint said Dish's bid of $4.40 a share for Clearwire last week-made just before a planned shareholder vote on a buyout by Sprint-isn't workable without Sprint's approval. Sprint, which has had disagreements with network partner Clearwire, says that Dish is requesting certain governance rights from Clearwire that can't be legally handed over without consent of Sprint and some other shareholders. "Sprint will enforce its legal and contractual rights. Thus, the Dish proposal is not actionable," the letter, signed by Sprint Chief Executive Dan Hesse, says. Clearwire shares recently slid 7 cents to $4.41. A Clearwire spokeswoman said a special committee of the company's board is continuing its review of the Dish bid and hasn't yet made a determination to change its recommendation for the Sprint deal. Clearwire won't make further comments until the review is complete, she said. Representatives from Dish weren't immediately available. Clearwire has postponed a shareholder vote on the Sprint deal until June 13.
Sprint had initially agreed to buy the remaining shares of Clearwire for $2.97 a share in December, but Dish came with a higher bid the next month for $3.30. Sprint raised its offer to $3.40 a share last month in the face of opposition from numerous Clearwire shareholders, but Dish came with its latest offer last week. Dish also has made a proposal to buy Sprint, and the two companies are in talks, something that could disrupt SoftBank Corp.'s agreement to buy 70% of Sprint for $20 billion. As part of its latest proposal to buy Clearwire, Dish said it wants at least a 25% stake, along with governance rights and seats on the company's board. That would give Dish Chairman Charlie Ergen significant influence over the future of Clearwire.
Sprint already owns about half of Clearwire, but Clearwire's complicated governance structure has made for a difficult relationship between the two companies, including disagreements over pricing, network plans and Clearwire's use of cash. Sprint needs a majority of the minority holders to approve a takeover of Clearwire. SoftBank Chief Executive Masayoshi Son has repeatedly expressed his confidence that Sprint would likely have enough influence over Clearwire if Sprint wasn't able to complete a takeover, saying the majority stake is "good enough."
In the letter Monday, Sprint seemed to be reminding Clearwire of their relationship, noting that Clearwire cannot "simply take away those rights when convenient to benefit a minority stockholder that finds such bargained-for rights inconvenient or limiting to its desire to extract extra gain." Clearwire, founded in 2003 by cellular pioneer Craig McCaw, was restructured in 2008 through a combination of certain Sprint operations and $3.2 billion in cash from Sprint and other partners. Sprint said Monday that governance rules put in place in 2008 prevent Dish's requests from being workable and, for example, would need the approval of Clearwire investor Comcast Corp., a competitor of Dish. Sprint asked Clearwire to "set forth a clear position of your view on the foregoing issues as soon as possible" because some Clearwire investors appear to see Dish's offer as a "viable alternative to the Sprint merger agreement, and this is simply not the case."
Dish wants significant rights under the tender offer, including being able to approve organizational changes and change of control transactions, along with having three members on Clearwire's board. Those latter requests are long shots as new directors need to be approved by four out of five members of the nominating committee of Clearwire's board, according to the company's governance rules, and Sprint can control two of those seats. Last week, Clearwire said it would forgo $80 million in monthly financing from Sprint under their buyout deal and would make a $255 million interest payment that was due June 1. Clearwire already had drawn on the monthly financing for the past three months until skipping June. The previous draws could allow Sprint to increase its equity stake in Clearwire to above 67% if the deal falls apart. Clearwire has warned that it could face bankruptcy if it stays independent and had deliberated on whether to make the interest payment in order to preserve cash. Wall Street Journal
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