You’ve likely heard by now that the quests to acquire Clearwire Corporation (NASDAQ:CLWR)’s spectrum still seem to be operating on the premise of by-any-means-necessary. SoftBank and Sprint Nextel Corporation (NYSE:S) on Monday said the two had agreed on SoftBank raising its bid for Sprint Nextel Corporation (NYSE:S) to $21.6 billion.
The problem is that the increase is still shy of DISH Network Corp (NASDAQ:DISH)’s $25.5 billion offer, leaving the door open for Sprint shareholders to vote down SoftBank’s offer.
The maneuvering among the heads of these heavyweights reminded me of a term I came across on Investopedia.com. Called the Godfather offer, I think it perfectly sums up the situation involving the back and forth bidding saga now known as SoftBank/Sprint/Clearwire Corporation (NASDAQ:CLWR)/DISH Network Corp (NASDAQ:DISH). If you are familiar with Francis Ford Coppola’s trilogy of Godfather movies, you may see the parallels between these movies and the CEOs at play in this four-way saga. Those CEOs are Dish’s Charlie Ergen, SoftBank’s Masayoshi Son, and to a lesser extent, Sprint’s Daniel Hesse.
A “godfather offer” is an irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price’s premium is extremely generous compared to the prevailing market price. Therefore, if the target company’s management refuses the offer, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing their fiduciary duty of looking out for the best interests of the shareholders. (Investopedia.com)
Four-way saga
Since December, this four-way saga has been intensifying. SoftBank and Sprint were all set to move forward with an agreement that would have allowed the Japanese-based company to buy a 70% stake in Sprint. The deal’s terms included Sprint buying the remaining roughly 49% of Clearwire Corporation (NASDAQ:CLWR).
But then, seemingly out of left field came Ergen with an offer for Clearwire Corporation (NASDAQ:CLWR) that trumped Sprint’s. Sprint’s per share offer was originally $2.97, while Dish’s was $3.30.
When Clearwire Corporation (NASDAQ:CLWR) shareholders learned how much more Ergen was willing to pay for their shares, they naturally screamed. Many of them thought Sprint’s offer was too low in the first place and Ergen’s higher bid solidified their notions. Clearwire Corporation (NASDAQ:CLWR) shareholders splintered over which offer to accept, and began hurling lawsuit threats at their board.
The Godfather Offers
All of this noise contributed to Ergen likely realizing he would be hard-pressed in actually getting a significant stake in Clearwire considering Sprint owns most of it. So, he simplified his hurdle-jumping in getting access Clearwire by bidding to just buy Sprint. He offered $25.5 billion.
Son has shown he’s just as formidable a player in the quest to buy Sprint and access Clearwire’s spectrum. His latest move came Monday when he worked out a deal with Sprint that increased his offer to $21.6 billion.
As if offering a bid that was lower than Dish and having it still be accepted by Sprint was not enough, Son seems to want even more. Sprint has discarded Dish’s offer, saying the company’s offer was not actionable. It has given Dish until June 18 to submit its “best and final offer.”
“As a consequence of the lack of progress with DISH and the improved terms from SoftBank, the Special Committee ended its discussions with DISH and will request that DISH destroy all of the Sprint confidential information made available in the course of its diligence.”
Running Out of Time
I can’t understand why Sprint agreed to allow Dish to look at its books in the first place. No matter, Dish quickly followed the announcement of the amended merger agreement with an announcement of its own stating that it “will analyze the revised SoftBank bid as we consider our strategic options.”
Time is of the essence when it comes to the finances of Sprint and Clearwire. Sprint has struggled to catch up with wireless carrier leaders AT&T and Verizon so it desperately needs billions of dollars of cash SoftBank will invest in it. On that same note, Clearwire’s management has said that without some kind of financial help, it could be bankrupt by the end of the year.
Can we vote already
As it does its analyzing, Sprint and Clearwire shareholders are looking for some kind of resolution to all of this. The back and forth has led to several votes being postponed. As it stands now, Clearwire’s shareholders were scheduled to vote on Sprint’s proposal on Thursday. I doubt that will happen with SoftBank’s latest proposal to buy Sprint scheduled for June 25.
Outside of Ergen being out of his league in vying for Sprint and Clearwire, I think the companies’ shareholders would be better off with SoftBank. For Sprint shareholders, SoftBank’s offer amounts to a 52% premium to its original offer. It pledges to deliver an additional $4.5 billion of cash to Sprint stockholders at closing, bringing the total cash consideration available to Sprint stockholders to $16.64 billion.
The article Who’s Your Godfather? Offers For Clearwire Defining Telecom Leaders originally appeared on Fool.com and is written by Tedra DeSue.
Tedra DeSue has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Tedra is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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