Sprint’s Offer for Clearwire Fails to Sway Opponents
Sprint Nextel Corp. (S)’s sweetened bid for wireless-network partner Clearwire (CLWR) Corp. has failed to persuade opponents to the takeover, raising speculation that the company will have to raise its price again.
Since Sprint increased its bid for Clearwire by more than 14 percent to about $2.5 billion this week, two major opponents have renewed their call to vote down the transaction. Crest Financial Ltd., a Houston-based firm, and a group of investors led by Mount Kellett Capital Management LP both filed letters calling for shareholders to reject the new terms.
Sprint, which already owns slightly more than 50 percent of Clearwire, is attempting to buy the remaining stake for $3.40 a share -- a price that values the total business at $10.7 billion. The shareholder opposition means Sprint must contemplate an even higher offer, said Kevin Smithen, an analyst at Macquarie Group Ltd.
“We think $3.75 gets the deal done,” said Smithen, who has the equivalent of a buy rating on Sprint and is neutral on Clearwire.
Mount Kellett, based in New York, forged its alliance with other shareholders earlier this month to coax Sprint into making a better offer. The group, which includes Highside Capital Management LP, Glenview Capital Management LLC and Chesapeake Partners Management Co., said yesterday that it remains opposed to the Sprint bid. The group accounts for more than 18 percent of Clearwire’s publicly traded shares.
The shareholders are still holding out for a better alternative even after Clearwire’s board endorsed the bid and ruled out offers from Dish Network Corp. (DISH) and Verizon Wireless.
“The opposing group stayed together,” said Kevin Roe, an analyst at Roe Equity Research in Dorset, Vermont. “They are the enabling bloc.”
The coalition members “continue to unanimously believe that the proposed price offered by Sprint is too low,” the group said in a filing.
Clearwire investors were scheduled to vote on the earlier bid this week in Bellevue, Washington, where the company is based. When Sprint increased the price, the meeting was pushed back until May 31.
Clearwire shares gained 1.2 percent to $3.42 at the close in New York. The stock has climbed 18 percent this year.
Crest, the other major opponent to the Sprint takeover, said this week that the new terms weren’t satisfactory. The investment firm urged Clearwire’s board to consider a separate, competitive process to seek fresh proposals.
Dish, the satellite-TV provider controlled by billionaire Charlie Ergen, offered $3.30 a share for Clearwire in January. While investors reacted by pushing the stock up above the price of the Dish bid, Clearwire said yesterday in a filing that no concrete proposal ever materialized.
Dish made a separate $25.5 billion offer to acquire Sprint in April, taking the focus off of its Clearwire bid. Since that time, Clearwire has “not had any substantive discussions” with Dish and has received no “actionable proposal,” according to the filing. Bob Toevs, a spokesman for Englewood, Colorado-based Dish, declined to comment.
The offer from Verizon also wasn’t practical, Clearwire said. While Verizon said it would pay Clearwire between $1 billion and $1.5 billion for spectrum in 25 major cities, the after-tax proceeds would have been about $550 million to $850 million, according to the filing.
Clearwire has said it needs at least $1.7 billion to keep operating, suggesting that the spectrum sale to Verizon wouldn’t have closed that funding gap.
“We indicated our interest in the Clearwire spectrum and are in the process of doing our diligence,” said Torod Neptune, a spokesman for Verizon Wireless. “Should there be an opportunity to purchase it we remain interested.”
Sprint’s majority ownership in Clearwire also creates hurdles for other parties seeking to make a deal. The Overland Park, Kansas-based company wants to gain full control of Clearwire so that it can tap its valuable wireless spectrum, which Sprint will use to build out its own network.
Sprint, the third-largest U.S. wireless carrier, is winding down a five-year joint venture with Clearwire. The two companies, backed by a coalition of technology and cable-industry partners, had sought to build a nationwide wireless network.
After billions in losses, Clearwire now says the Sprint takeover is its best remaining option.
“The revised offer, when compared with other potential transactions reasonably available to the company at this time, is the most favorable potential transaction,” Clearwire said yesterday in a statement.
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