Sprint Nextel Corp. (S) increased its bid for full control of its wireless-network partner Clearwire Corp. (CLWR) (CLWR), seeking to persuade shareholders to reject a competing proposal from Dish Network Corp. (DISH) (DISH)
Sprint offered $3.40 a share, up 14 percent from a previous bid of $2.97 a share, the company said today in a statement. That compares with Dish’s proposal of $3.30 a share. Clearwire, which was scheduled to vote on Sprint’s earlier offer this morning, delayed the decision until May 31.
The sweetened bid follows a showdown with Clearwire investors, who balked at the original terms. Even though Sprint already owns slightly more than 50 percent of the business, the full takeover would give it control over Clearwire’s valuable spectrum -- something it needs to bolster its own network. Sprint realized it had no choice but to boost its price, said Roger Entner, an analyst at Recon Analytics.
“It was a game of chicken and they blinked,” said Entner, who is based in Dedham, Massachusetts. “They need to have Clearwire integrated -- there’s no way around it.”
Clearwire shares climbed 4.3 percent to $3.40 at the close in New York after Sprint raised its offer. The shares had already been trading well above the earlier $2.97 bid, a sign investors saw the increase coming.
Bob Toevs, a Dish spokesman, declined to comment on whether the satellite carrier would raise its bid for Clearwire.
Sprint, the third-largest U.S. wireless carrier, needs support from the majority of Clearwire’s Class A shareholders to gain control of the remaining 49 percent of Clearwire it doesn’t own. The move would wind down an ambitious joint venture with Clearwire that had attempted to build a nationwide wireless Internet network.
Begun in 2008, the project was backed by $3.2 billion in investments from Google Inc. (GOOG), Intel Corp (INTC). and cable-TV companies. After losses piled up, partners such as Google and Time Warner Cable Inc (TWC). sold their stakes for a fraction of their original value.
While Overland Park, Kansas-based Sprint has the upper hand because it already owns more than half of Clearwire, it has faced opposition from investors such as Mount Kellett Capital Management LP and Crest Financial Ltd.
“With a sweetened deal they should win the votes they need,” Entner said. “There are some religious opponents they won’t be able to convert, but the $3.40 should get them an approval.”
Sprint’s new offer is still not enough, Crest said today in a statement. The Houston-based investment firm said it sent a letter urging Clearwire’s board to reject the new bid, arguing it should have a separate, competitive process to seek proposals.
Clearwire, based in Bellevue, Washington, has said it faces a cash crunch and needs at least $1.7 billion to keep operating. Shareholder-advisory groups Institutional Shareholder Services Inc. and Egan-Jones Ratings Co. both endorsed earlier Sprint’s bid, citing Clearwire’s dim prospects as an independent company.
Glass, Lewis & Co., another proxy-advisory firm, disagreed, saying Sprint hadn’t made a compelling case that its offer was the best option. Clearwire investors such as Crest argued that the company’s assets were being undervalued. Crest even offered to lend the company money itself to help keep it afloat.
Sprint made its bid for Clearwire after agreeing to a deal with SoftBank Corp. (9984) in October. In that transaction, Tokyo-based SoftBank would acquire 70 percent of Sprint for $20.1 billion. The takeover would help SoftBank expand into the U.S. and give Sprint an $8 billion cash infusion.
Dish, the Englewood, Colorado-based satellite provider controlled by billionaire Charlie Ergen, is making a separate attempt to thwart the SoftBank acquisition. He bid $25.5 billion for Sprint last month, part of a strategy to expand into the mobile-phone business.
Earlier today, Clearwire had set a date of May 30 for a new vote on Sprint’s offer. It sent a statement later saying the new date would be May 31, without explaining why it had changed the schedule.
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