Print 11 comment(s) - last by BRB29.. on Jun 28 at 11:50 AM

Approval sets the stage for a fight over ClearWire

DISH Network Corp. (DISH) founder and CEO Charlie Ergen hates losing.  But it appears that he has lost in his acquisition bid for Sprint Nextel Corp. (S), with approximately 80 percent of shareholders (with 98 percent voting) approving of a rival bid from Japanese carrier Softbank Corp. (TYO:9984).

I. SoftBank Wins

The SoftBank bid on the surface looked slightly less favorable, offering a bit less cash, less stock, and a lower final ownership stake.  

But shareholders -- and Sprint's management -- took issue with the fine print that Mr. Ergen tends to load his bids with, and felt SoftBank's deep experience as a successful mobile operator made it a better fit (versus DISH who could offer service bundling opportunities).  Further, Sprint shareholders and management voiced skepticism about DISH's ability to raise the amount of cash it promised for the bid.

Charlie Ergen v. Masayoshi Son
Charlie Ergen (Dish/Echostar) and Masayoshi Son (Softbank) both serve as joint chairman and CEOs of their firms.  Both have a penchant for driving a hard deal.  And both hate to lose.
[Image Source: Sawyer Speaks (left); Bloomberg (right)]

Under the SoftBank deal, shareholders will get $16.64B USD in cash, or roughly $7.65 USD per share.  The share pool will then swell, so that SoftBank owns 78 percent of Sprint and existing shares constitute 22 percent of the pool.  The deal should wrap up by July, though it could be extended, if necessary.

Sprint sign
The acquisition must now past U.S. regulatory approval. [Image Source: Lisa Poole/AP]

The deal will next need to score regulatory approvals from the U.S. Federal Communications Commission (FCC) and U.S. Department of Justice (DOJ) (the latter of which gives a silent blessing by declining to sue to block major mergers).

II. Will Ergen Looks to Drive Clearwire Into Bankruptcy to Punish Sprint?

The big question is how Mr. Ergen will take this news, and whether he'll try to punish Sprint for its rejection.

At stake is Sprint's partially-owned subsidiary Clearwire Corp. (CLWR).  Currently Sprint controls about 50 percent of shares in the wireless broadband company, while minority shareholders hold the rest.

Mr. Ergen has hoisted an attractive proposal for those minority shares, which is much sweeter than a bid by Sprint's, who is bidding to fully own Clearwire.  Clearwire's board has endorsed the proposal, which will soon be put to a vote among minority shareholders.

But Sprint is suing to block that acquisition, saying it violates the company's governing documents, which require Sprint to approve of such deals.  Sprint contends that it has a strong interest in the success of Clearwire, having poured billions in investments into it.  It accuses Mr. Ergen of offering an acquisition contract that triggers debt-based cash payouts that could let him turn a profit if Clearwire goes bankrupt.

Under Mr. Ergen's offer, he could gain if Clearwire goes bankrupt. [Image Source: TNW]

Thus the worst-case scenario (according to Sprint) is for Mr. Ergen to win his bid (and against Sprint's challenge), and then opt to drive Clearwire into bankruptcy, scoring both sweet retribution against the carrier who scorned him, plus cash.  Such a scenario could constrain the finances of SoftBank, which would further benefit Mr. Ergen if he carries through on rumored plans to launch a fifth major U.S. carrier leveraging his hoarded stockpile of spectrum.

Dan Hesse
Sprint CEO Dan Hesse loves the SoftBank acquisition. [Image Source: Ellis Hamburger]

Still Sprint took an optimistic tone in its press release on the acquisition vote, with CEO Dan Hesse (who owns almost 1 percent of the company) remarks, "Today is a historic day for our company, and I want to thank our shareholders for approving this transformative merger agreement.  The transaction with SoftBank should enhance Sprint’s long-term value and competitive position by creating a company with greater financial flexibility."

Source: Sprint

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: finally!
By BRB29 on 6/26/2013 12:15:44 PM , Rating: 2
they had a proposal to pay with cash and stocks. They can't offer something they don't have.

RE: finally!
By Shig on 6/26/2013 1:58:45 PM , Rating: 2
No, but seriously as a Sprint customer, F*CKING FINALLY. MOAR LTE, SKGO.

RE: finally!
By BRB29 on 6/26/2013 2:01:40 PM , Rating: 2
I once used Sprint because they had really good offers. Then I realized why. Switched to Verizon and paid more but can't complain since then. If this deal improves Sprint, then I am happy for all those who have suffered after signing that contract.

RE: finally!
By Shig on 6/26/2013 5:26:56 PM , Rating: 2
It's all about research, no one company will permanently be the best. Every new contract has to be thoroughly researched.

Unlimited 4G LTE is good.

RE: finally!
By BRB29 on 6/26/2013 6:02:44 PM , Rating: 2
What's the point of 4G if coverage is limited? I had problems just making regular calls. A ton of sprint users still do.

I have good coverage with verizon and unlimited 4G LTE.

RE: finally!
By V-Money on 6/27/2013 12:13:42 AM , Rating: 2
I have good coverage with verizon and unlimited 4G LTE.

Care to link where you can currently buy an unlimited 4g plan with Verizon? If you were grandfathered in, then I would counter your...
What's the point of 4G if coverage is limited?

...With "whats the point of using unlimited 4g as an argument point if no one else can get it"...

RE: finally!
By BRB29 on 6/27/2013 8:17:24 AM , Rating: 2
Care to link where you can currently buy an unlimited 4g plan with Verizon? If you were grandfathered in, then I would counter your...

The unlimited plan have been around until middle of last year. They didn't take it out of the system until June-July period. I still have unlimited 4G LTE because I did not change my contract like the rest of the idiots out there looking for a free phone.

...With "whats the point of using unlimited 4g as an argument point if no one else can get it"...

There's still millions of Verizon users with unlimited 4G(like me). A ton still have the double data plan which is more than enough data for almost everyone. Only new subscribers gets this new retarded overpriced plans. A lot of people didn't take the upgrade, they just go online and found a phone somewhere else for $200-300 and stick with their old unlimited/double data plans.

RE: finally!
By superflex on 6/27/2013 2:30:11 PM , Rating: 1
I stuck with Sprint because I'm on SWAC (Sprint Wireless Advantage Club). $40/month for unlimited data, text and 450 non-wireless minutes (unlimited wireless to wireless), a new phone every 20 months, no contract , and the new phones are at contract prices. Paid $149 for a black HTC One and received a $100 Visa Card from HTC for trading in my EVO 4G.

Again, $40/mo., no contract, unlimited data and phones at contract prices. There is 4G LTE where I live so the lack of 4G in your shithole town doesn't concern me.

Enjoy your unlimited VZW 4G on your antiquated phone.
Just don't drop it.

RE: finally!
By BRB29 on 6/28/2013 11:50:49 AM , Rating: 2
You can be in any sprint club you want. You can have as many minutes as you want. You can have as much data as you want. It all means nothing if it is unreliable. Hence why I would rather pay more even though it looks like I got less on paper. In reality, my calls always go through and I have coverage everywhere I go. 4G is available everywhere in every city and it is fast.

How are you going to criticize me and the millions of sprint customers that fled to verizon? we all did it for the same reason. Horrible phone service and the worst customer service of any phone company....or any company.

The only thing attractive with Spring is their price.

"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki