The Softbank, Clearwire Corporation (NASDAQ:CLWR), and Sprint Nextel Corporation (NYSE:S) – oh and let’s not forget Dish Network Corp. (NASDAQ:DISH) and now Deutsche Telecom – fiasco is one of the more confusing acquisition attempts that I’ve ever followed; filled with conspiracy theories and “what ifs” at every turn. While most investors are placing their bets on how this might all turn out – here is a quick run-down of what’s going on – you can then invest your money in the stock that you believe has the most to gain.
It All Started When?
Back in mid-2012, Sprint Nextel Corporation (NYSE:S) reportedly approached Dish Networks about gaining access to its 4G spectrum. As I’ve explained before, spectrum is like an interstate that allows traffic to flow smoothly. When lanes of an interstate are closed, traffic becomes congested. Spectrum allows data to flow freely.
In October 2012, Softbank makes an offer to acquire a 70% stake in Sprint Nextel Corporation (NYSE:S) for $20.1 billion. Then, less than two months later, Sprint bids to acquire its remaining 50% stake of Clearwire for $2.97 per share.
Not only did Clearwire Corporation (NASDAQ:CLWR) investors object to the $2.97 offer from Sprint Nextel Corporation (NYSE:S), saying it was too cheap, but Dish went nuts! The company filed every petition under the sun with the FCC — asking for more time to referencing “competitive effects” and then also arguing that a valuable spectrum would be controlled by a foreign company (Softbank). Simply put, Dish tried everything to block the deal!
Obviously, Dish felt as though it would be unsuccessful with the FCC petitions, so the bidding war begun. Dish then offered $3.30 for Clearwire Corporation (NASDAQ:CLWR), easily trumping Sprint Nextel Corporation (NYSE:S)’s $2.97 offer.
Next, Dish went the other direction, with a $25.5 billion bid for Sprint, which was $5.4 billion better than that of Softbank. In an interview with Reuters, Dish founder Charlie Ergen said he could consider selling Dish altogether if he loses a bidding war with Softbank for Sprint.
You might ask, “why is Sprint so important to Dish?” The answer lies in Dish’s spectrum. Back when the two were discussing a partnership (in the very beginning), there were still a lot of questions surrounding Dish’s spectrum, as the FCC had not approved it for mobile use.
Today, Dish’s spectrum has been approved for mobile – but Dish has no wireless network – meaning it wants Sprint Nextel Corporation (NYSE:S)so it can offer mobile services. Moreover, this leads me to believe that bids for Clearwire Corporation (NASDAQ:CLWR) are more for distance and irritation, meaning to mess up Softbank’s perfect plan (who knows what that is).
However, Sprint doesn’t appear to have any interest in Dish – because instead of accepting Dish’s offer – Sprint actually upped its bid for Clearwire Corporation (NASDAQ:CLWR) to $3.40! As you might recall, Charlie Ergen has already said that he will not be denied, and obviously, he will not be ignored. So what does he do? He counters the offer for Clearwire with a $4.40 bid; by far the highest yet!
Now, where this gets even more confusing is when you try to understand “purpose.” Because as it stands now, Dish hasn’t made clear why it wants Clearwire Corporation (NASDAQ:CLWR), nor does it make sense. Dish already has a spectrum, thus adding to my “distance and irritation” theory. On Friday, the newest leg to this drama was created, or at least the newest chapter was written. Softbank, who has remained relatively quiet throughout this process, is, according to Reuters, in talks with Deutsche Telekom to buy its stake in T-Mobile if the deal with Sprint Nextel Corporation (NYSE:S) were to fall apart.
Deutsche Telekom has a 74% stake in T-Mobile, a company valued at $15 billion. Thus, if Softbank were to acquire the company, with a 40% premium, it would pay around $15.5 billion.
How Does This All End?
So the question is what will happen next? Honestly, your guess is as good as mine. There are a lot of conspiracy theories running wild, and I suppose that one is just as good as another. However, if someone were to ask me how this all plays out then I’d say it’s pretty clear. Well, as clear as one might expect from such a scenario.
First, I think Dish acquires Sprint Nextel Corporation (NYSE:S). Dish has made it clear that it is not backing down, and the premium that it offered for both Clearwire and Sprint tells Softbank loud-and-clear that it’s not in the business of raising bids by pennies per share.
Softbank reportedly stands to make around $5 billion if the Sprint deal falls through, in currency hedging gains. Therefore, it might make more sense to buy the stake in T-Mobile, a company that no one else wants, and let Dish and Sprint go on their way.
The only real question for me is with Clearwire. I don’t know where it fits into the scheme of this deal. If Dish and Sprint Nextel Corporation (NYSE:S) merge then the combined assets would include both a wireless network and a spectrum. If Softbank purchases Sprint then a spectrum is still needed – but not when Dish is involved. Thus, I conclude that Clearwire gets left out in the cold, which could end horribly for shareholders.
With that said, I will throw a little more fuel in the fire, suggesting that Sprint is currently a puppet on a string, and Softbank is the puppet master. I don’t think Sprint Nextel Corporation (NYSE:S) would have made the offer if not under the guidance of Softbank. Therefore, even if Softbank acquires T-Mobile and Dish says “see ya later” to Clearwire, I wouldn’t be shocked if T-Mobile makes a bid for Clearwire (as the new puppet)!
Then, everyone might be happy – but like I said, this is just speculation – there are 100 possible outcomes. My suggestion is to understand that this is a risky scenario, and to invest with caution – or take a number and place your bets. The only thing that’s certain is that this will get a lot more confusing before the outcome is clear. Hopefully, you are on the right side, if you’re playing the game!
Brian Nichols has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article The Most Confusing Bidding War Ever! What Will Happen? originally appeared on Fool.com.
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