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Clearwire Board: Sprint Offer is Best Option

Letter to Minority Shareholders Doesn’t Mention Dish’s Sweeter, Rival Bid 5/06/2013 9:24 AM Eastern

The board of Clearwire is urging minority shareholders to approve Sprint Nextel’s proposed $2.2 billion to acquire the rest of the wireless company, claiming the offer is the best option on the table.

In a letter issued to shareholders on Monday, Clearwire chairman John Stanton said the board has “unanimously concluded that the proposed transaction with Sprint is the best strategic alternative for stockholders, representing fair, attractive and certain value, especially in light of the Company’s limited alternatives and the well-known constraints of its liquidity position.”

Clearwire agreed in late 2012 to a $2.2 billion deal where Sprint would acquire the outstanding shares the telecom giant didn’t already own for $2.97 each. Dish followed the next month with an unsolicited counter bid of $3.30 per share for Clearwire’s outstanding stock.  On Friday, shareholders representing about 18% of Clearwire shares banded together to declare the Sprint offer as “too low,” seeking that it be raised. 

The letter issued by Stanton on Monday does not reference Dish’s sweetened, rival bid, but noted that the Sprint offer, nonetheless, represents a “substantial premium” to the price received by other investors. By way of example, the letter noted that Google received $2.26 per share for its Clearwire stock on March 1, 2012, while Time Warner Cable received $1.37 per share for its Clearwire holdings on Oct. 3, 2012.

Stanton likewise argued that the Sprint deal gives Clearwire “a clear solution to the substantial funding gap Clearwire is facing,” noting that the company’s prospects of securing the $2 billion to $4 billion in additional funding necessary to continue operation and its Long Term Evolution (LTE) build plan “are highly uncertain.”  

Clearwire has been outlining a bleak financial picture for a while. In the third quarter of 2012, Clearwire noted that it had 12 months of liquidity remaining. In its first quarter 2013 filings, Clearwire said that, without securing additional funding, it will deplete its liquidity in the first quarter of 2014, even if it curtails or suspends its LTE buildout plan.

According to Monday's letter, Clearwire’s special committee considered two sets of financial projections prepared by Clearwire’s management team during its evaluation of the Sprint proposal:  one where Sprint remains Clearwire’s only major wholesale customer and increases its wholesale purchases by more 500%, to more than $2 billion by 2020; or the addition of “substantial non-Sprint network traffic beginning in 2014,” implying an immediate agreement with another major wholesale customer.

Clearwire said it has failed to secure any takers for the latter option, "[d]espite concerted efforts and discussions with more than 100 targets.”

Clearwire has scheduled a special meeting of stockholders to vote on the proposed Sprint transaction on Tuesday, May 21.

 

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April