* Dish offers $4.76/share in cash, about 0.05953 in stock
* Says offer $7/shr is 13 pct premium above SoftBank bid
* New entity would have 63 mln subscribers, $50 bln in revs
By Sinead Carew and Liana B. Baker
April 15 Dish Network Corp, the No. 2
U.S. satellite television provider, on Monday offered to buy
wireless service provider Sprint Nextel Corp for $25.5
billion in cash and stock, a move that could inspire other
telecommunications or video companies to consider their own
prospects of combining.
Dish's offer could trump a proposal in October by Japanese
wireless operator SoftBank Corp to buy 70 percent of
Sprint for $20.1 billion.
Unlike SoftBank, which is only proposing an investment in
Sprint, Dish is promising to bring customers technical benefits
- the ability to watch video anywhere, anytime through a
combination of its satellite service with Sprint's wireless
Dish's surprise, unsolicited bid is the latest twist in a
wave of consolidation in the U.S. wireless industry, where
carriers are frantically trying to combine to build more
powerful networks and compete with market leaders Verizon
Wireless and AT&T Inc.
It is the boldest step yet by Dish Chairman Charlie Ergen,
who has spent billions of dollars on wireless spectrum in the
last few years and made a counteroffer to a bid by Sprint for
Clearwire Corp, a spectrum-rich wireless company
majority-owned by Sprint.
Sprint shares soared as much as 17.8 percent on Monday to a
nearly four-and-a-half-year high and slightly topped the value
of the Dish bid.
BTIG analyst Walter Piecyk said Dish's move could trigger
other deals. "Everything should be on the table when you have a
major movement like this when a major player in one part of the
business is buying a major player in another part of the
business as a combined entity," said Piecyk.
"If you are a competitor and you don't make a move, it's a
lost opportunity," Piecyk said, referring to other
telecommunications and video companies that offer some - but not
all - of what a combined Dish and Sprint would offer.
Other analysts agreed that the combination of Dish and
Sprint could change the wireless market.
"The idea that Dish can take this huge spectrum holding and
pretty quickly put it to use as a mobile services product really
adds a new competitor element to the landscape," said Bill
Menezes, principal research analyst at Gartner.
Dish's bid comprises $4.76 in cash and 0.05953 share of Dish
stock for each Sprint share. The offer, which works out to $7
per share, represents a premium of roughly 12 percent to
Sprint's close on Friday.
"This is the culmination of a lot of years of work. Whether
it be the purchase of spectrum, entering auctions, the
acquisition of Sling Media, all those things come together now
with the merger with Sprint," Ergen said on a conference call
with analysts and reporters.
SHAREHOLDERS WELCOME OFFER
Sprint said it would evaluate the proposal but declined
further comment. Some Sprint shareholders welcomed the Dish
"It does appear it offers more value than SoftBank's
agreement," said Roy Behren, an investment manager at
Westchester Capital, a merger arbitrage investor. "We'd be in
favor of any transaction that offers superior value."
Behren's firm held 14 million Sprint shares at the end of
2012, according to the latest publicly available information.
Another investment manager at a top-25 Sprint shareholder
also reacted positively to Ergen's offer for the company.
"It makes very good sense because he brings more to the
table on a bunch of different levels than SoftBank does," said
the investment manager, who asked not to be named in the absence
of approval to speak to the media.
"I'd vote for the Dish deal. It's more value," said the
manager, who sees a combined Dish and Sprint being in a better
position to compete, even though they would be more high
leveraged than a Sprint that is 70 percent-owned by SoftBank.
Some analysts said the Dish offer could lead to a bidding
war with SoftBank, even though an improved bid could be pricey
because of a recent decline in the value of the Japanese yen.
While apples-to-apples comparisons are difficult because
SoftBank is offering to buy only part of Sprint, analysts said
the fact that the yen is 20 percent weaker now than last October
would be a complicating factor.
13 PERCENT PREMIUM
Dish said its offer was 13 percent greater than SoftBank's,
based on share prices and exchange rates as of last Friday. It
was not immediately clear precisely how the offers compared,
though, given that SoftBank's offer has multiple steps and is
for part, not all, of Sprint.
Dish's offer would leave Sprint shareholders with 32 percent
ownership of the combined company. Under the SoftBank deal they
would own 30 percent of Sprint.
SoftBank could not immediately be reached for comment on
Dish's bid. SoftBank Chief Executive Masayoshi Son is known to
be as fierce a competitor as Ergen, and analysts eagerly awaited
his response to the Dish offer.
Dish shares fell 2.3 percent to finish trading on Monday at
$36.77, while Sprint's rose 13.5 percent, or 84 cents, to end
trading at $7.06, after rising as high as $7.33 earlier in the
'REALIZATION UNDER SMALLER PLAYERS'
A combined Dish and Sprint would have 63.1 million retail
subscribers and $50 billion in annual revenue, Dish said in a
The play for Sprint came together in the last few months as
Dish started to think about alternatives to gain even more
spectrum, according to a source familiar with the matter.
As much as Dish wants a wireless partner, analysts said,
Sprint also needs a deal to compete more effectively.
"There is a realization among the smaller players in the
U.S. market that they need to merge or partner to compete
against Verizon and AT&T, which are both so strong commercially
and in terms of network quality," said Kester Mann, telecoms
analyst at consultancy CCS Insight.
Barclays is serving as financial adviser to Dish, which said
it intended to fund the bid with $8.2 billion in cash from its
balance sheet as well as debt financing. Earlier this month,
Dish priced a debt offering of $2.3 billion, more than double
what was planned.
In its letter to Sprint's board, Dish said it had received a
"highly confident letter" from Barclays with regard to its
financing, which suggests Dish would have little difficulty
raising the funds it needs. Dish said it would have to raise
about $9.3 billion total in new funding, though its structure
has not yet been set.
Analysts said they considered the offer a good strategic
move on Dish's part, albeit a potentially expensive one.
"Forget the execution, next move is there a bidding war for
Sprint and how big does it go and how expensive does it get?
Dish has synergies SoftBank does not (have)," said Vijay Jayant,
an analyst at ISI Group.