Sprint Nextel Corp. sued Dish Network Corp. (DISH) to block a buyout of Clearwire Corp. (CLWR), a maneuver intended to promote its sale to Japan’s SoftBank Corp. (9984) and repel a higher bid from Dish.
The suit is the latest salvo in a battle of billionaires pitting Charlie Ergen at Dish against Masayoshi Son of SoftBank, Japan’s third biggest mobile phone company. Sprint agreed last week to sell itself to SoftBank for $21.6 billion, spurning a $25.5 billion bid by Dish that Sprint has called not “actionable.”
Sprint and Dish are both trying to buy Bellevue, Washington-based Clearwire and its wireless network to bolster their ability to compete for U.S. mobile phone customers. Sprint, the No. 3 U.S. wireless carrier which owns slightly more than 50 percent of Clearwire, has offered $3.40 a share. Dish topped Sprint’s offer last week, offering $4.40 a share for all of Clearwire. Clearwire’s board has endorsed Dish’s bid.
“Sprint’s lawsuit is a transparent attempt to divert attention from its failure to deal fairly with Clearwire’s shareholders,” blocking them from getting a fair price for their shares, Dish spokesman Bob Toevs said in a statement. “Dish is confident that its superior offer will be upheld and Clearwire shareholders will be free to realize the 29 percent premium represented by the DISH offer.”
Sprint says Dish’s offer is designed to coerce Clearwire shareholders into handing over their shares “or else be left holding stock in a corporation that will be handicapped by unlawful corporate governance restrictions, onerous debt provisions and subject to massive monetary damages claims,” according to the suit, filed yesterday in state court in Wilmington, Delaware.
The offer for Clearwire by Dish, the Englewood, Colorado-based satellite-TV provider controlled by Ergen, values all of the shares in Clearwire, including a stake already held by Overland Park, Kansas-based Sprint, at about $6.5 billion.
Sprint said in its Delaware Chancery court suit that Dish executives were “successful in fooling Clearwire’s minority shareholders into voting against” Sprint’s offer in hopes of getting a higher price for their stock.
Mike DiGioia, a spokesman for Clearwire, said in an e-mail that the company doesn’t comment on pending litigation as a matter of policy.
Clearwire fell 1.5 percent to $4.56 in Nasdaq Stock Market trading today in New York. The shares have gained about 59 percent this year amid the bids and counterbids. Dish rose about 0.7 percent and Sprint gained about 1.4 percent.
Sprint has been trying to buy the rest of Clearwire’s shares since December. It boosted its offer last month to $3.40 a share to satisfy a bloc of investors who oppose the deal. Sprint trails Verizon Wireless and AT&T Inc. (T) among U.S. wireless carriers.
SoftBank’s $21.6 billion offer has the backing of Sprint’s board and the wireless company’s second-largest investor, Paulson & Co. Son is “determined to be No. 1 in the world very soon in my industry,” he said in a speech last week. “You are lucky not to be my competitor.”
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. Institutional Shareholder Services Inc., the largest investor-advisory firm, has endorsed Dish’s Clearwire bid, citing the “significantly higher” cash amount and the board’s support for the offer.
If Dish can buy 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.
Sprint contends Dish’s bid for Clearwire is flawed because it depends on obtaining at least 25 percent of Clearwire’s shares and would let the satellite company appoint at least three directors to the board, according to court filings.
Handing over such governance rights to Dish would violate Delaware corporate law, Sprint’s lawyers said in the lawsuit.
Dish’s bid also runs afoul of an equity holders’ agreement forged in 2008 when Clearwire was created as a joint venture between Sprint and other companies, Sprint’s attorneys said in the suit. Accepting Dish’s offer would violate that accord, they added.
The case is Sprint Nextel Corp. (S) v. Dish Network Corp., Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at email@example.com