Mobile phone carrier Sprint Nextel Corp. (S) on Tuesday sweetened its offer by 14 percent to acquire the 49.2 percent stake in wireless network operator Clearwire Corp. (CLWR) that it currently did not own. The raised offer stands at $3.40 per share and represents a significant premium over the unaffected Clearwire share price. The offer values Clearwire at $10.7 billion.
The current sweetened offer tops the rival offer floated by satellite TV provider Dish Network Corp. (DISH) in early January to acquire all of Clearwire's common stock for $3.30 per share along with some of its spectrum assets.
The revised offer from Sprint Nextel is subject to formal approval by Clearwire Board of Directors, and a majority of Clearwire stockholders not affiliated with Sprint or Japan's third-largest mobile carrier Softbank Corp. (SFTBY).
Clearwire said it has received commitments from Comcast Corp. (CMCSA), Intel Corp (INTC) and Bright House Networks LLC, who collectively own about 26 percent of Clearwire's shares not affiliated with Sprint, to vote their shares in support of the deal. SoftBank has also consented to the increased offer by Sprint, as required by its merger agreement with Sprint.
Meanwhile, Softbank had agreed in mid-October to acquire a 70 percent stake in debt-laden Sprint for about $20.1 billion or nearly 1.57 trillion yen.
The closing of the Sprint-Clearwire deal is contingent on the consummation of Sprint's transaction with SoftBank. The Clearwire and SoftBank transactions with Sprint are expected to close by the middle of next year.
The completion of the deal with Softbank will enable Sprint to receive an immediate infusion of cash, enabling it to keep pace with strong competition from larger rivals AT&T Inc. (T) and Verizon Inc. (VZ). It will also provide Sprint with funds to pay down debt at the parent company and at Clearwire.
The acquisition of Sprint will help Softbank to expand its footprint outside Japan. Softbank had acquired the Japanese unit of British telecom giant Vodafone Group plc (VOD, VOD.L) in 2006.
Sprint had agreed to acquire the 49.2 percent stake in Clearwire that it does not currently own for $2.97 per share in mid-December in an about $2.2 billion deal. Sprint already owns a 50.8 percent stake in Clearwire.
Sprint noted that the current sweetened offer provides Clearwire shareholders with enhanced value, and is the best strategic alternative for Clearwire and its shareholders. The offer represents a 162 percent premium over Clearwire's unaffected closing share price of $1.30 on October 10, 2012, when the Sprint-SoftBank discussions were first confirmed.
The deal will provide Sprint access to Clearwire's 2.5 Ghz spectrum that will enhance Sprint's spectrum portfolio and strengthen its position and increase competitiveness in the U.S. wireless industry.
The deal will also see Sprint achieving operational efficiencies and improved service for customers as the spectrum and network is migrated to 4G LTE standards. Sprint is credited with introducing the first wireless 4G service from a carrier in the U.S.
Meanwhile, Dish has also submitted an unsolicited $25.5 billion cash and stock takeover bid for Sprint, calling the offer superior to that of Softbank. Dish expects that such a deal would create an industry-leading spectrum portfolio and also make it the only company to offer a fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services. Dish Network has begun due diligence, and is engaging in merger talks with Sprint, which said it has received a waiver from Softbank.
In Tuesday's regular trading session, S is currently trading at $7.38, up $0.09 or 1.17% on a volume of 19.34 million shares. In the past 52-week period, the stock has been trading in a range of $2.36 to $7.40. Meanwhile, CLWR is currently trading at $3.43, up $0.17 or 5.21% on a volume of 26.56 million shares.
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