Clearwire Corp. (CLWR)’s board endorsed Dish’s $4.40-a-share bid for the company this week, spurning an offer by majority owner Sprint Nextel Corp. (S) The move deals a setback to Tokyo-based SoftBank, which sees a Sprint-Clearwire combination as the centerpiece of its U.S. expansion plan. SoftBank is vying with Dish to acquire Sprint, the third-largest U.S. wireless carrier.
Sprint separately agreed this week to a $21.6 billion takeover by SoftBank, rejecting a higher offer by Dish that it said was not “actionable.” If Dish is able to acquire the portion of Clearwire that Sprint doesn’t own, it could force the carrier to reconsider whether SoftBank is its best suitor, said Walt Piecyk, an analyst at BTIG LLC. Without full control of Clearwire and its valuable airwaves, Sprint won’t be able to execute on its plans for a fourth-generation network, he said.
“Sprint without Clearwire is a company without spectrum to do many of the 4G things they want to do,” said Piecyk, who is based in New York. “If you now have Clearwire recommending Dish, that’s a leg up Ergen has to buy Sprint and Clearwire.”
Ergen, the chairman and co-founder of the satellite-TV company, is angling for both Clearwire and Sprint as part of a plan to expand into wireless services. His offer for Clearwire would value the entire business at about $6.5 billion.
There is still time before the Clearwire deal is completed, Son said in an interview in Tokyo today, declining to elaborate.
“I am determined to be No. 1 in the world very soon in my industry,” Son said in a speech today. “You are lucky not to be my competitor.”
SoftBank shares rose as much as 3.4 percent before trading 2 percent higher at 5,080 yen as of 11:24 a.m. in Tokyo. The stock has surged 61 percent this year. Clearwire’s stock rose 2.3 percent to $4.47 at the close in New York, while Dish climbed 2 percent to $38.47.
Institutional Shareholder Services Inc., the largest investor-advisory firm, also endorsed Dish’s Clearwire bid. It cited the “significantly higher” cash amount and the board’s support for the offer.
Egan-Jones Ratings Co. recommended Clearwire investors vote against the Sprint deal. The advisory firm backed SoftBank’s offer for Sprint.
“We appreciate Clearwire’s recognition of the superior value that we are able to deliver its stockholders,” said Bob Toevs, a spokesman for Englewood, Colorado-based Dish.
Son, the billionaire president of SoftBank, may have to shell out more money to help Sprint win its bidding war for Clearwire -- even as he still faces a contest for Sprint itself. Sprint said Dish has until June 18 to submit its “best and final” offer for the carrier.
Clearwire’s board postponed a shareholder meeting scheduled for this week to vote on Sprint’s earlier $3.40-a-share bid. While that decision is now slated for June 24, Bellevue, Washington-based Clearwire said investors should vote against the offer.
Dish, meanwhile, extended its tender offer for Clearwire until July 2 from June 28. It’s seeking to buy at least 25 percent of the company.
“The economics of it were so much better than Sprint’s prior offer,” Gerard Hallaren, an analyst at Janco Partners Inc. in Greenwood Village, Colorado, said of Dish’s proposal. “I suspect Dish will get a good position in Clearwire.”
Both Dish and Sprint are seeking to gain control of Clearwire’s airwaves, which are used to provide high-speed Internet access. The spectrum was originally devoted to a nationwide network backed by a technology and cable-industry coalition. After years of losses, partners such as Google Inc. sold their stakes in the project. Clearwire has said it needs at least $1.7 billion to keep operating, putting pressure on the company to sell itself.
“Sprint continues to have every intention of enforcing its governance rights,” White said in an e-mail. “All commercial agreements, including network and customer agreements, will be honored and enforced as it regards our ongoing relationship with Clearwire.”
While it considered whether Dish’s offer would hurt Clearwire’s relationship with Sprint and SoftBank, the board concluded that Dish’s bid was the better deal because it represented a 29 percent premium to Sprint’s proposal, it said in a separate regulatory filing.
If shareholders don’t accept either offer, Clearwire may not be able to raise enough capital to continue its operations past March 2014.
“We can give you no assurance that in a restructuring you would receive any value for your shares,” the company said in the filing.
The proposal by Dish includes an agreement to designate at least three directors to the Clearwire board and the right to veto some of the wireless company’s actions, which would violate an agreement between Clearwire’s shareholders and Delaware law, Sprint said last week.
In a separate statement this week, Dish said Clearwire investors representing 245,411 shares had already accepted its proposal, still a small portion of the 699.2 million Class A shares outstanding.
While Ergen has the upper hand in the fight for Clearwire, he’s still plotting his next move in his pursuit of Sprint. After SoftBank raised its bid earlier this week -- and Sprint’s board accepted the new deal -- Dish said it still believes Sprint has “tremendous value.”
“We will analyze the revised SoftBank bid as we consider our strategic options,” Dish said.
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