Sprint announced on Monday that it had reached an agreement to buy the nearly 50 percent stake in Clearwire that it did not already own for $2.97 a share — a bump up from the $2.90 a share that was offered on Thursday.
The improved $2.2 billion offer, Sprint said, represents a premium of 128 percent over Clearwire’s stock price in early October before speculation emerged — following SoftBank‘s investment in Sprint — that Sprint would seek to buy out the wireless network operator.
Sprint already owns 51.7 percent of Clearwire. Buying the rest would give it full control over spectrum that it could use to build out its network.
Sprint is able to complete the deal thanks to cash from SoftBank of Japan, which agreed in October to a $20.1 billion transaction to gain majority control of the American telecommunications company, which lags far behind the market leaders, AT&T and Verizon Wireless.
The deal would allow Sprint to expand its Long-Term Evolution network, which is based upon the same data standard used by the newest generation of smartphones. Clearwire owns spectrum that is similar to what SoftBank uses in Japan, potentially giving the newly strengthened Sprint more clout in ordering the latest devices.
The chief executive of Sprint, Dan Hesse, said in a statement: “Today’s transaction marks yet another significant step in Sprint’s improved competitive position and ability to offer customers better products, more choices and better services. Sprint is uniquely positioned to maximize the value of Clearwire’s spectrum and efficiently deploy it to increase Sprint’s network capacity.”
SoftBank added in a statement that it supports the deal, which it believes will improve the landscape for American cellphone service.
Clearwire’s board approved the offer based on the recommendation of a special committee of directors not appointed by Sprint. Clearwire also has commitments from Comcast, Intel and Bright House Networks, which collectively own 13 percent of the voting shares, to support the deal.
Some of Clearwire’s minority shareholders believed that the company should hold out for a higher price, with one analyst calling for at least $5 a share. One of these investors, Crest Financial, said that it would try to block Sprint’s deal with Softbank if the earlier offer of $2.90 a share went through.
And another, Mount Kellett, had argued that based on what AT&T paid for roughly similar spectrum, Sprint should be paying at least four times as much.
But Sprint argued privately that its previous bid valued the network operator’s spectrum at about the same level that Verizon paid for spectrum that it acquired from cable companies, according to a person briefed on the matter. And Clearwire’s spectrum, Sprint claimed, is of lower quality and therefore less valuable, meaning that the company was effectively paying more than Verizon did.
Clearwire has struggled to to join the ranks of the biggest American cellphone service providers, despite bringing on big-name investors. Some of its previous stakeholders, including Google and Time Warner Cable, chose to sell off their holdings for a fraction of their purchase prices.
Agreeing to the deal announced Monday will help shore up Clearwire’s finances, at a time when it projected having enough cash to last a year or so and still faces significant debt obligations. Sprint has pledged to provide up to $800 million in interim financing to the network operator.
Citigroup and the law firms of Skadden, Arps, Slate, Meagher & Flom and King & Spalding advised Sprint. The Raine Group acted as financial adviser to SoftBank and Morrison Foerster acted as counsel to SoftBank.
Evercore Partners and the law firm Kirkland & Ellis advised Clearwire. Centerview Partners acted as financial adviser and Simpson Thacher & Bartlett and Richards, Layton & Finger acted as counsel to Clearwire’s special committee. Blackstone Advisory Partners advised Clearwire on restructuring matters. Credit Suisse acted as financial adviser and Gibson Dunn & Crutcher acted as counsel to Intel.
DealBook: Sprint Reaches Deal to Buy Out Clearwire
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DealBook: Sprint Reaches Deal to Buy Out Clearwire
