Sprint Nextel Corp. won over Clearwire Corp.’s board after raising its bid to take over the smaller carrier to $2.97 a share in a transaction now valued at $2.2 billion.
The shares of money-losing Clearwire jumped above $3 last week after Sprint made an initial $2.90-a-share offer, a sign that investors were anticipating a higher bid. The stock traded at $3.06 at 7:39 a.m. in New York.
The raised offer was approved by Japan’s Softbank Corp., which agreed in October to buy 70 percent of Sprint for about $20 billion, the companies said in a statement today. Holding 100 percent of Bellevue, Washington-based Clearwire, owner of a broad swath of airwaves across the U.S., would give Sprint the ability to improve its network and handle a surge of traffic generated by smartphones and tablets.
Sprint’s attempt to buy out the 50 percent it doesn’t own in Clearwire has been opposed by investor Mount Kellett Capital Management LP, which last week called the $2.90-a-share offer “grossly” undervalued. Clearwire’s unused spectrum, which can be used to offer wireless phone and Internet service, is worth about $6 billion to $9 billion alone, Mount Kellett said. The firm said it owns about 3.6 percent of Clearwire’s outstanding stock, which it considers to be worth $6.30 a share.
Walter Piecyk, an analyst at BTIG LLC in New York, has said that the offer may have to climb to more than $5 a share to win over the majority of non-Sprint investors.
Influx of Cash
Sprint, the third-largest U.S. carrier, is getting an influx of cash from Tokyo-based Softbank, giving it more money to make deals. Softbank wouldn’t agree to a bid above $2.97 a share, people familiar with the negotiations said last week. That was the price Sprint paid for Clearwire shares from telecommunications pioneer Craig McCaw in a transaction completed earlier in the week.
Today’s agreement gives Clearwire an enterprise value of approximately $10 billion, including net debt and spectrum lease obligations of $5.5 billion, according to the statement.
The transaction would end a four-year joint venture that struggled to build a nationwide network capable of challenging Verizon Wireless and AT&T Inc.
When Sprint formed the Clearwire venture in 2008, it relied on $3.2 billion in investments from Google Inc., Intel Corp., and cable companies such as Comcast Corp. and Time Warner Cable Inc. As losses piled up, partners such as Google and Time Warner Cable sold their stakes for a fraction of their original value.
Comcast, Intel and Bright House Networks LLC, which collectively own approximately 13 percent of Clearwire’s voting shares, agreed to vote their stock in support of the raised offer, Sprint said.
In connection with the deal, Clearwire and Overland Park, Kansas-based Sprint have entered into agreements that provide as much as $800 million of additional financing for Clearwire in the form of exchangeable notes.