It looks like M&A is back. DISH Network Corp (NASDAQ:DISH) announced on Monday a large bid for Sprint Nextel Corporation (NYSE:S), with which it is looking to become the biggest player in video, broadband and voice services. Reportedly, the merger would provide great value for shareholders of both companies, and huge synergy-related benefits. In any case, the offer looks substantially better than a previous bid from Softbank, and seems to have a good chance of success.
DISH Network Corp (NASDAQ:DISH) has offered to pay around $25.5 billion for Sprint Nextel Corporation (NYSE:S), offering $4.76 in cash and 0.05953 shares of DISH Network Corp (NASDAQ:DISH) stock per Sprint Nextel Corporation (NYSE:S) share. The bid represents a premium of roughly 12% to the Friday closing price of Sprint Nextel Corporation (NYSE:S), but following the news, Sprint Nextel Corporation (NYSE:S)’s stock price quickly caught up to the $7.00 at which the DISH Network Corp (NASDAQ:DISH) deal values the company. Previously, Sprint Nextel Corporation (NYSE:S) had agreed to sell a 70% stake in the company to Japan’s Softbank Corp for around $20 billion.
According to DISH Network Corp (NASDAQ:DISH) management, the deal is set to unlock significant value for shareholders through an enhanced strategic position for the combined companies, and synergy-related benefits currently estimated at around $37 billion. In other words, the merger of the two companies would solidify the position of both; their products and services complement each other, and they can achieve considerable savings through enhanced economies of scale.
DISH Network Corp (NASDAQ:DISH) says the deal is clearly superior to Softbank’s bid, not only because of the combined strength of the companies, but also because of the higher price with a larger cash percentage.
The deal would reportedly result in an industry-leading spectrum portfolio, and would allow the coporation to provide a seamlessly integrated home and mobile bundle of video, broadband, and voice services. According to DISH Networks’ chairman Charles Ergen, the deal could upon completion propel the merged companies to a position of national industry leadership. The deal will be funded by $8.2 billion of DISH’s own balance sheet, with the rest covered by debt financing.
Clearwire Corporation (NASDAQ:CLWR) Bids
DISH has been working on expanding its portfolio of spectrum assets recently, putting in a $2.28 billion bid for Clearwire Corporation (NASDAQ:CLWR)’s spectrum assets. The deal was in fact a counter-proposal to Sprint’s offer of $2.2 billion for the roughly 50% of Clearwire it did not yet own.
Clearwire has indicated that it would be in danger of bankruptcy if it didn’t quickly secure additional funding. It now looks as if DISH is trying to sidestep the Clearwire deal by simply acquiring Sprint itself, effectively killing two birds with one stone.
In recent months, the telecom sector has been shaken up by a number of large merger talks. It all started with Deutsche Telekom AG’s plan to sell T-Mobile to AT&T Inc. (NYSE:T) last October, which fell through because of antitrust concerns.
DT then decided it would try to buy MetroPCS Communications, Inc. (NYSE:PCS) in an effort to beef up T-Mobile, but this deal also came under fire. Previously, DISH had already put in a bid for MetroPCS Communications, Inc. (NYSE:PCS) at around $11 per share. DT and DISH Networks are still in acquisition talks at the moment.
The Bottom Line
With its bid for Sprint-Nextel, DISH Networks is looking to become the national leader in home and mobile video, broadband and voice services. It has been working hard to expand its spectrum portfolio, and now seems to have found a way to put the airwaves to work. The combined company would be a very serious player in the Telecom sector, which has recently been seeing an increasing amount of M&A action. If the deal is completed, DISH Networks could be looking at a very profitable integrated business.
The article Dish Networks Looking to Become Industry Leader with Sprint Bid originally appeared on Fool.com and is written by Daniel James.
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