DealBook: Sprint Beats Dish’s Latest Bid for Clearwire

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DealBook: Sprint Beats Dish’s Latest Bid for Clearwire

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DealBook: Trying to Avoid Rejection, Sprint Nextel Raises Its Offer to Buy All of Clearwire

Joe Raedle/Getty ImagesCellphones at a Sprint Nextel store. Sprint increased its offer for the nearly 50 percent stake in Clearwire that it does not own.

6:03 p.m. | Updated

Sprint Nextel sweetened its bid for full control of the wireless network operator Clearwire on Tuesday, moving at the last minute to avert rejection by shareholders.

Sprint Nextel sweetened its bid for full control of the wireless network operator Clearwire on Tuesday in an effort to avert rejection by shareholders.

Sprint is now offering $3.40 a share for the nearly 50 percent stake in Clearwire that it does not already own. That is 14 percent higher than the cellphone service provider’s December bid, and now values the stake at $2.5 billion.

The move highlighted the resistance Sprint is facing in its bid for Clearwire, an important part of its turnaround strategy. A number of major shareholders had angrily denounced the previous bid of $2.97 a share as too low, though other major Clearwire investors had already sold to Sprint at lower prices.

The sweetened offer, which was completed on Monday night, suggests that Sprint knew its previous proposal was bound to fail. Though the company already has the support of Clearwire investors that own about 26 percent of the network operator’s stock, it must still win over an additional 24 percent.

“The revised offer demonstrates Sprint’s commitment to closing the Clearwire transaction and improving its competitive position in the U.S. wireless industry,” Sprint said in a statement.

Clearwire postponed a vote on the deal, which had been scheduled for Tuesday, to May 30, while its board evaluates the latest proposal.

Shares of Clearwire jumped to $3.40 a share Tuesday, suggesting that while investors may still be hoping for a higher bid, they would be more amenable to accepting the new proposal.

Still, one of the biggest critics of the Sprint offer, the hedge fund Crest Financial, urged shareholders to reject even the sweetened bid as too low.

“Clearwire is acting in its usual stockholder-unfriendly way by adjourning the special meeting to grant Sprint the ability to pose a new, still inadequate offer,” David K. Schumacher, Crest’s general counsel, said in a statement. “Stockholders should demand that the Clearwire board finally act in the best interest of all shareholders, not just in the interest of Sprint.”

The battle over Clearwire is playing out in the shadow of a fight over Sprint itself. On one side is SoftBank of Japan, which has bid $20.1 billion for the company. On the other is Dish Network, which offered $25.5 billion last month.

Late on Monday, Sprint said that it was still holding due diligence talks with Dish to see if its newer suitor’s proposal was likely to prove superior. SoftBank has consented to the limited negotiations between Sprint and its rival bidder.

A decision by Sprint’s board could come within the next two or three weeks, according to a person briefed on the matter.

Sprint’s securing full control of Clearwire would be especially important to SoftBank, as that would allow the American cellphone service company to expand its Long-Term Evolution network, using the high-speed data standard employed by the latest generation of mobile devices.

Sprint is betting that upgrading its network will help it better compete against bigger rivals like Verizon Wireless and AT&T, after years of struggling to compete.

Its bid was made possible by a cash infusion from SoftBank of Japan, which bid $20.1 billion late last year to gain control of Sprint. Clearwire’s spectrum is similar to what SoftBank uses in Japan, potentially giving Sprint more bargaining power to order the newest phones.

SoftBank’s chief executive, Masayoshi Son, has suggested that Sprint could carry out its turnaround plans even without buying full control of Clearwire. Even if Sprint’s takeover entreaties fail, the company will still end up owning about 65 percent of the network operator.

But Clearwire still faces enormous financial pressure, and has already slowed important network improvements to preserve cash. The company has retained the Blackstone Group as an adviser on potential reorganization options, including a bankruptcy filing.

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DealBook: Sprint Nextel Reaches a Deal to Buy Rest of Clearwire

Joe Raedle/Getty ImagesSprint is to expand its Long-Term Evolution network.

7:07 p.m. | Updated

Sprint Nextel agreed Monday to buy all of the wireless network operator Clearwire, an important step for the cellphone service provider as it continues its big turnaround campaign.

Under the terms of the bid, Sprint will pay $2.97 a share for the nearly 50 percent stake in Clearwire that it did not already own for a total of about $2.2 billion.

The two companies must still convince restive Clearwire shareholders that they should accept a bid only modestly raised from last week and that some have called too low.

The price is a bump up from the $2.90 a share that it offered last Thursday, and represents a premium of 128 percent over Clearwire’s stock price in early October, before speculation emerged that Sprint would seek to buy the wireless network operator. Sprint’s first proposal to Clearwire, made around Nov. 21, was worth about $2.60 a share.

Clearwire’s board approved the offer based on the recommendation of a special committee of directors not appointed by Sprint. Clearwire also has commitments for the deal from Comcast, Intel and Bright House Networks, which collectively own 13 percent of the voting shares.

Shares of Clearwire closed on Monday at $2.91, having fallen more than 13 percent as investors gave up on the prospects of a significantly higher offer.

Sprint is able to make the offer as a result of a cash injection from SoftBank of Japan, which agreed in October to a $20.1 billion transaction to gain majority control of the American telecommunications company. Sprint still lags far behind the market leaders, Verizon Wireless and AT&T.

The Clearwire deal would allow Sprint to expand its Long-Term Evolution network, which is based upon the same data standard used by the newest generation of smartphones. Clearwire owns spectrum that is similar to what SoftBank uses in Japan, potentially giving the newly strengthened Sprint more clout in ordering the latest devices.

Warren Mell/ClearwireClearwire demonstrated its 4G modem, which uses cell signals for wireless broadband, in Las Vegas in 2009.

Sprint initially invested in Clearwire in 2008 as part of an unusual consortium that also included Google, Intel and Time Warner Cable, with the aim of creating a next-generation data network. The telecom had long been the biggest investor, with significant leverage over Clearwire, but did not have full control.

“It feels good,” Daniel R. Hesse, Sprint’s chief executive, said in a telephone interview. “It’s been a four-year journey for me, and a long journey for Clearwire’s management and its board.”

Some of Clearwire’s minority shareholders have said that the company should hold out for a higher price, with one analyst calling for at least $5 a share.

One of these investors, Crest Financial, said that it would try to block Sprint’s deal with SoftBank if the earlier offer of $2.90 a share had gone through.

Erik E. Prusch, Clearwire’s chief executive, said his company had explored a wide range of alternatives to a sale. But those options — including a sale of excess spectrum, a deal with another strategic partner or raising additional capital — would have fetched far less money.

And he noted that Clearwire had retained the Blackstone Group as an adviser on reorganization options, which people briefed on the matter have said included a potential bankruptcy filing. The company said that as of Sept. 30, it had enough cash to last for about a year, though it had slowed important network improvements.

As part of the deal announced Monday, Sprint will provide the company with up to $800 million in interim financing.

“At this point, we believe that a restructuring is quite possible, should our transaction with Sprint not close,” Mr. Prusch said on a conference call with analysts.

In an interview, he noted that Google had sold its holdings in Clearwire this year at $2.26 a share. Time Warner Cable sold its shares for $1.37 apiece.

Citigroup and the law firms of Skadden, Arps, Slate, Meagher & Flom and King & Spalding advised Sprint. The Raine Group acted as financial adviser to SoftBank and Morrison Foerster acted as counsel to SoftBank.

Evercore Partners and the law firm Kirkland & Ellis advised Clearwire. Centerview Partners acted as financial adviser and Simpson Thacher & Bartlett and Richards, Layton & Finger acted as counsel to Clearwire’s special committee. Blackstone Advisory Partners advised Clearwire on restructuring matters. Credit Suisse acted as financial adviser and Gibson Dunn & Crutcher acted as counsel to Intel.

DealBook: Sprint Offers $2.1 Billion for Clearwire and Its Spectrum

Yuriko Nakao/ReutersMasayoshi Son, left, the founder of SoftBank, and Daniel Hesse, Sprint’s head, announcing their deal in October.

9:19 p.m. | Updated

With the help of a deep-pocketed new partner, Sprint Nextel is ready to spend money to shore up the future of its wireless network.

The telecommunications company offered on Thursday to buy out the part of Clearwire, the wireless network operator, that it doesn’t already own for $2.1 billion. The bid values Clearwire at about $4 billion.

Sprint agreed less than two months ago to sell a majority stake in itself to SoftBank, a major Japanese cellphone service provider.

Under the terms of its proposal, Sprint will pay $2.90 a share for Clearwire, according to a regulatory filing. Sprint, which already owns 51.7 percent of Clearwire, needs the approval of both SoftBank and a substantial portion of Clearwire’s minority shareholders.

Clearwire said in a regulatory filing on Thursday that its board had formed a special committee to consider Sprint’s offer.

Shares in Clearwire have slumped more than 85 percent since they began trading over five years ago. But they leapt nearly 15 percent on Thursday, to $3.16. That suggests that investors believe a higher offer may be forthcoming.

The Sprint offer could benefit both companies. For Sprint, buying all of Clearwire would lock up spectrum that Sprint could use to build out its newest data network.

Long the No. 3 cellphone service provider in the country behind Verizon Wireless and AT&T, Sprint has moved aggressively to bolster its position within a consolidating industry. Sprint’s deal with SoftBank gives it a well-heeled partner willing to infuse $20.1 billion into the company.

The Clearwire deal could also help fend off a newly revitalized T-Mobile USA, which has announced plans to merge with the smaller MetroPCS.

A deal would also give Clearwire, which has struggled for much of its existence, some much-needed cash — up to $800 million — after paying off some of its heavy debt obligations. The company reported having $1.2 billion in cash as of Sept. 30, which it expected to last about a year.

Formed with much promise as a next-generation wireless service provider, Clearwire has instead flailed after betting on WiMax, a high-speed wireless data standard that failed to gain traction.

A union of Sprint and Clearwire had long been expected. Soon after the SoftBank deal was announced, both Daniel R. Hesse, Sprint’s chief executive, and Masayoshi Son, SoftBank’s founder, intimated that acquisitions were in Sprint’s future.

“This is a scale game,” Mr. Hesse said in an interview in October.

Clearwire’s shares rose immediately after the SoftBank investment was announced, fueling speculation about a bid from Sprint. A few days later, Sprint increased its holdings in Clearwire, buying shares from Craig O. McCaw’s Eagle River Holdings. The transaction gave Sprint a majority stake in Clearwire.

Sprint is working to build out a Long Term Evolution, or LTE, network that can support the latest smartphones like the iPhone 5. Clearwire owns spectrum that is similar to the radio band that SoftBank uses, potentially creating a path for devices that can be used in both the United States and Japan.

And while Sprint has long been the biggest stakeholder in Clearwire, it hasn’t been able to exert full control over one of its most important partners.

Some of Clearwire’s smaller shareholders, including the investment firms Mount Kellett Capital Management and Crest Financial, have cautioned the company against selling out to Sprint for too low a price.

Mount Kellett has suggested that Clearwire consider selling a portion of its spare spectrum to other telecommunications companies, like AT&T or T-Mobile. And Crest Financial said on Thursday that it was willing to take steps as drastic as petitioning government regulators to block Sprint’s deal with SoftBank, in an effort to win a higher price.

An analyst at BTIG Research, Walter Piecyk, estimated that Sprint would need to pay at least $5 a share to secure Clearwire.

But Sprint already has a fair amount of leverage over its smaller partner. It already controls a majority of Clearwire’s voting shares and is its biggest customer. And having posted a string of losses, Clearwire is running out of cash to keep itself afloat.

Sprint has already been in discussions with its major partners in Clearwire — a group that includes the cable operators Comcast and Bright House as well as the chip maker Intel — to convince them that its bid represents a big premium over Clearwire’s October trading position. It is also betting that those companies are eager to shed a losing investment.

Together, they control more than 12 percent of the total votes in Clearwire. Winning them over would put Sprint significantly closer to the roughly 75 percent of the vote it will need to buy control of the company.

DealBook: Sprint Gains Greater Control of Clearwire

Warren Mell/ClearwireClearwire demonstrated its 4G modem, which uses cell signals for wireless broadband, in Las Vegas in 2009.

6:48 a.m. | Updated

Sprint Nextel has secured control of Clearwire, the wireless network operator that holds valuable spectrum, according to a regulatory filing on Thursday. The filing shows that Sprint agreed on Wednesday to acquire the interests in Clearwire held by Craig O. McCaw’s Eagle River Holdings.

The transfer of Class A shares and Class B interests gives Sprint a majority stake of 50.8 percent of Clearwire. The agreement simplifies a relationship with Clearwire that has complicated Sprint’s attempts to overhaul its network. It comes as Sprint is preparing to sell a 70 percent stake in itself to the big Japanese cellphone provider and Internet company SoftBank, for $20.1 billion.

Taking control of Clearwire was not a necessity for the completion of the SoftBank transaction, which is expected to close by the middle of next year, pending regulatory approval. And it may not consist of buying out other investors’ stakes in the company altogether: one person briefed on the matter suggested that Sprint could buy the voting rights of some of its partners. But Sprint and SoftBank have also not ruled out pursuing a full acquisition after their own deal closes. Shares in Clearwire rose 1.7 percent, to $3, in premarket trading on Thursday.

Clearwire, founded in 2003 by Mr. McCaw, a pioneer in the wireless services industry, already handles some data traffic for Sprint customers. But it has long faced financial difficulty, requiring several cash infusions from outside investors. While the company focused on a wireless data standard that has been supplanted by Long Term Evolution, or LTE, it holds valuable spectrum that Sprint and its prospective new owner covet.

That wireless resource could be used to develop Sprint’s LTE data network, which would support newer devices like the Apple iPhone 5 and various Android-based products.

Building out that network is among the most important goals SoftBank has for Sprint. SoftBank’s chief executive, Masayoshi Son, has devised a strategy revolving in large part around building the same sort of high-speed data infrastructure he is creating in the Japanese market. Mr. Son believes having a reliable and fast network would allow Sprint to better take on the two major wireless service providers in the United States, Verizon Wireless and AT&T.

“U.S. citizens don’t have this experience of high speed,” Mr. Son said on a conference call with analysts on Monday. “We’re going to bring that to the States.” Through a number of investments, Sprint previously had about 48 percent of Clearwire, and the right to fill seven seats on the company’s 13-member board. But without greater control over the wireless broadband provider, Sprint ran the risk of losing control of one of its most important partners.

Sprint Nextel will obtain the interests in Clearwire held by Craig O. McCaw’s Eagle River Holdings, simplifying a relationship with Clearwire that has hampered Sprint’s attempts to overhaul its network.

DealBook: Clearwire Is Sought by Sprint for Spectrum

Ken Lambert/The Seattle Times, via Associated PressCraig McCaw, founder of Clearwire, in 2006.

Sprint Nextel has moved to protect one of its most valuable assets — access to a big chunk of spectrum — just as it is preparing to become a more aggressive force in wireless, with the backing of SoftBank of Japan.

The company, the No. 3 cellphone provider in the United States, disclosed on Thursday that it had offered to buy a stake in Clearwire from its founder, Craig O. McCaw, the cellphone pioneer, effectively giving it majority control of the struggling broadband company.

Sprint already relies on Clearwire to handle data demands for some of its customers, and the smaller network’s big block of wireless spectrum could be useful in building out its own next-generation cellphone network.

“We believe it is a strong signal that Clearwire’s future could likely be increasingly aligned with Sprint’s strategy,” Michael Rollins, an analyst with Citigroup, wrote in a note to investors.

Sprint and SoftBank announced on Monday a deal that involves the Japanese telecommunications giant buying a 70 percent stake for $20.1 billion as well as providing an immediate cash infusion into Sprint.

While the Clearwire maneuver is not directly connected to that deal, it is a signal of intent from the American cellphone company, whose recent ambitions to challenge the market leaders Verizon Wireless and AT&T have been limited by a debt-laden balance sheet.

Sprint has already been converting much of its existing infrastructure into a Long Term Evolution network, which uses a faster data technology used by the newest smartphones.

A portion of Clearwire’s spectrum, which is similar to the radio band that SoftBank uses, could eventually be turned into an LTE highway for devices that work on the networks of both Sprint and its Japanese partner.

While the agreement with Mr. McCaw appeared to come together with surprising speed, Daniel R. Hesse, Sprint’s chief executive, said in an interview on Thursday that his company had already made it known to its partners in the company, which include Intel and Comcast, that it would be interested in buying their stakes if they were willing to sell.

Sprint already owns more than 48 percent of Clearwire, but the agreement with Mr. McCaw’s investment vehicle, Eagle River Holdings, buying class A and class B shares from it for $100 million, will push that stake to more than 50 percent. Under the terms of agreements among the Clearwire investors, Eagle River must offer the other companies the right to buy into a portion of its shares.

Both Intel and Comcast have received that offer, giving them 30 days to decide.

Perhaps the most important aspect of the agreement with Mr. McCaw, from Sprint’s perspective, is that the board seat held by Eagle River would be filled by Clearwire, adding a third independent director on the 13-member board.

Sprint would still control seven board seats. But having more independent voices could keep Clearwire more aligned with the network operator’s interests. Other strategic investors in Clearwire have also named directors. Agreements among the strategic investors require that certain important business decisions be approved by 10 of Clearwire’s 13 directors.

“Sprint would sleep better at night knowing that the board was still controlled by Clearwire,” said Craig Moffett, an analyst with Sanford C. Bernstein.

Shares of Clearwire tumbled 10.18 percent on Thursday, to $2.03, as investors’ hopes for a more conventional takeover were dashed.

Mr. Hesse stressed that the Eagle River transaction was not required for the closing of the SoftBank deal, and that he was not currently planning to further change Clearwire’s governance.“Our interest is aligned with the public’s,” he said.

But Mr. Hesse acknowledged that his company had previously been constrained in the strategic moves that it could make because of its heavy debt load and limited cash. “It’s been very tough sledding for us because we have been the poor kid on the block,” he said. “We have seen a number of opportunities pass us by over the years.”

Last month, Time Warner Cable said it planned to sell its 7.8 percent interest in Clearwire. Sprint passed on buying that stake at the time, but Mr. Moffett said that the company would have loved to have reached a deal if possible.

Mr. Hesse may now be feeling emboldened after having struck the deal with SoftBank. The Japanese company plans to inject $8 billion directly into Sprint as part of its effort to take control of the American carrier, which can be used for corporate moves like acquisitions.

It isn’t clear whether — or when — Sprint will try to buy out its remaining partners in Clearwire, though a person close to one of the other strategic investors said that any decision would ultimately come down to the price.

Neither Mr. Hesse nor Masayoshi Son, the founder and chief executive of SoftBank, would comment on other moves, including potential takeovers. People briefed on the matter have said that Sprint had considered bidding for MetroPCS, a smaller American cellphone service provider that plans to merge with T-Mobile USA.

Mr. Son has intimated that he envisions Sprint as a potential vehicle to buy other service providers. The enlarged T-Mobile has been suggested as a possible target. In an interview on Thursday, he emphasized that his ambition is to create one of the world’s biggest mobile Internet companies.

And Mr. Hesse said on Thursday that he still anticipated being a part of the deal-making in the American cellphone service industry.

“This is a scale game,“ he said, adding that he believes regulators would favor transactions that fortified competitors to Verizon Wireless and AT&T, which currently tower over the rest of the industry.

But first their transaction must pass muster with American regulators, including the Justice Department and the Federal Communications Commission. It must also be reviewed by the Committee on Foreign Investment in the United States a government panel that determines whether a deal would pose a threat to national security.

Neither Mr. Hesse nor Mr. Son said that they expect any problems with the committee review, and that they have not heard from any legislators regarding potential issues with Sprint having a foreign owner.

And while a joint venture of SoftBank obtains network equipment from Huawei and ZTE, two Chinese telecommunications equipment makers criticized by the House Intelligence Committee earlier this week as being threats to national security, Mr. Son said that he is mindful of keeping the American government happy.

He said that Huawei and ZTE currently supply only a small part of his company’s total equipment, and that he is mindful of the multiple government agencies that currently have contracts with Sprint. “We will respect whatever the American government wants,” he said.