Clearwire says Dish bid still under consideration

NEW YORK Fri Feb 1, 2013 6:28pm EST

The sign in the lobby of the corporate headquarters of Dish Network is seen in the Denver suburb of Englewood, Colorado April 6, 2011. REUTERS/Rick Wilking

The sign in the lobby of the corporate headquarters of Dish Network is seen in the Denver suburb of Englewood, Colorado April 6, 2011.

Credit: Reuters/Rick Wilking

NEW YORK (Reuters) - Clearwire Corp CLWR.O said on Friday that it was still evaluating a takeover bid from satellite television provider Dish Network Corp (DISH.O) even though it continues to recommend the Sprint Nextel Corp (S.N) offer it had accepted in December.

Minority shareholders of wireless service provider Clearwire, which is majority owned by Sprint, have been hoping to fetch a higher price for their shares since Dish announced a non-binding counter bid of $3.30 per share in January.

The Sprint deal, which requires approval from minority holders, values Clearwire at $2.97 per share. While Dish would be unable to buy Clearwire without Sprint's approval, analysts say that it could potentially force Sprint to sweeten its bid.

Clearwire's proxy statement, filed with regulators on Friday, revealed that Clearwire board member John Stanton was pushing for higher offers from both Sprint and Dish in the days ahead of the Sprint agreement. Clearwire said Stanton had pushed Sprint for an offer of $3.15 per share but to no avail.

Clearwire, whose biggest customer is also Sprint, said in a separate statement that it would continue negotiations with Dish and Sprint and had passed on financing from Sprint for a second time due to the Dish offer. It set a February 28 deadline for network upgrade talks with Sprint, which at least one analyst sees as a potential deadline for the Dish review.

Dish's offer had required Clearwire to refrain from tapping Sprint financing that was part of their buyout agreement and some of the financing Sprint offered requires a commitment from Clearwire to speed up an upgrade of its wireless network.

Sprint described the Dish offer as "illusory" because it has so many conditions, some of which would go against Clearwire's existing commercial agreement with Sprint.

But Clearwire's decline of $160 million of financing from Sprint so far suggests that it sees potential for a firm Dish deal or at least a higher offer from Sprint, analysts said.

"If the Dish offer was as 'illusory' as Sprint claims or Dish was not making a good effort to work out a transaction that Clearwire's special committee could recommend, it's likely Clearwire would have taken down this cash," said BTIG analyst Walter Piecyk.

D.A. Davidson analyst Donna Jaegers, who personally owns Clearwire shares, said that it could possibly negotiate a spectrum sale with Dish, giving it some more badly-needed funding and "more breathing room and time to bargain with Sprint" for a higher offer.

But several analysts were skeptical about Dish's plans.

"If they were really interested in acquiring the company, it would have been in Dish's interest to present a more definitive offer by the time Clearwire filed its proxy," said Shing Yin of Guggenheim Partners. "If I were a shareholder, I would still feel somewhat uncertain about Dish's true intentions."

DISH WIRELESS AMBITIONS

Dish, which is controlled by high profile billionaire Charlie Ergen, has been looking to diversify beyond its core pay-TV business, which has matured and faces tough competition from cable, telecom and Internet video providers. Ergen has paid more than $3 billion to buy wireless assets since 2011.

Brean Capital analyst Todd Mitchell said he doesn't think Dish "has the wherewithal" to acquire all of Clearwire.

Dish declined to comment on Friday.

Clearwire said in its proxy statement that it has been in negotiations with a number of companies, including Sprint, as far back as 2010 and Dish since mid-2011. Clearwire has been seeking financing to avoid bankruptcy and to fund its efforts to build a high-speed wireless network.

Clearwire, which has said it has enough funding until the third quarter, said in the proxy that it does not expect to generate positive free cash flow until 2018. If it signs up other wholesale customers besides Sprint it might get to positive free cash flow by 2016, it said.

For its part, Sprint said in December that it would buy $80 million of convertible Clearwire notes per month for up to 10 months as part of its buyout proposal.

Clearwire, which already declined Sprint financing in January because of the Dish review, said it decided against drawing on the financing for February for the same reason. t said it had not yet decided whether it will draw on the Sprint funds in the coming months.

Under the current agreement Sprint is only required to give Clearwire the last three months' financing if they can reach an agreement on a timeframe for Clearwire to speed up its network upgrade plans.

They were unable to reach an agreement on the upgrade commitment by a Jan 31 cut off date so they have now extended the deadline to February 28, Clearwire said.

"They're drawing a line in the sand on how long they can continue to negotiate with Dish," Jaegers said.

Sprint needs approval from a majority of Clearwire's minority shareholders for its proposed deal.

While Sprint said in December that it had support from shareholders including Comcast Corp (CMCSA.O) and Intel Corp (INTC.O), owners of about 29 percent of the minority shares have told Reuters that they are not happy with the offer price.

Some big minority holders such as Crest Financial and Mount Kellett have spoken publicly about their objections to Sprint's offer and Clearwire's acceptance of the offer. Crest sued to stop the deal, and Mount Kellett said the Sprint offer price was "grossly inadequate."

However, after the detailed proxy statement, Jaegers said that Clearwire's special committee, appeared to have explored every possible option. The committee includes independent directors Dennis Hersch, Theodore Schell, John Stanton, Bruce Chatterley and Mufit Cinali, according to the proxy.

In its proxy statement Clearwire said it had talks with as many as eight potential partners since 2010 in addition to Sprint, Dish and three private equity companies that ultimately decided not to pursue a deal.

This included talks "throughout the summer of 2011" about the possible sale of spectrum to a U.S. based provider of Internet products and services that Clearwire did not name.

In the summer and fall of 2012, Clearwire said it also held preliminary discussions with a manufacturer of wireless technology and a semiconductor company, which it referred to as "Party I" about a possible spectrum sale and other alternatives such as a network hosting arrangement.

While Clearwire recommended in its proxy statement that shareholders should vote in favor of the Sprint deal, the company, which had a deadline to make the filing, made it clear that it had not made its final decision about Dish.

Sprint said it was pleased Clearwire recommended its deal.

"We continue to believe that the DISH proposal is illusory and conditioned on many things, including the receipt of governance rights, a spectrum sale and a commercial agreement which are not actionable under our merger agreement and other agreements between Clearwire and Sprint," Sprint said.

Clearwire shares closed up 1.0 cent at $3.19 on Nasdaq. Sprint shares closed up 6 cents or 1.0 percent at $5.69 on New York Stock Exchange. Dish shares ended the day 1 percent higher at $37.68.

(Additional reporting by Nicola Leske and Liana Baker; Editing by Peter Lauria, Lisa Von Ahn, Bernadette Baum and Sofina Mirza-Reid)

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