Clearwire’s management continues to show its preference for an acquisition by Sprint Nextel, sending a letter this morning to investors urging them to approve the pending $2.2 billion deal and laying out reasons for its decision.
The letter, authored by current Clearwire Executive Chairman John Stanton, tells investors that the current offer from Sprint Nextel is the “best strategic alternative” for shareholders, noting it “delivers fair, attractive and certain value, especially in light of Clearwire’s limited alternatives and liquidity constraints.” Part of that “limitation” of course is Sprint Nextel’s current majority ownership status in Clearwire and its decision to not approve the sale of its share in the company to another entity. Clearwire investors are set to vote on the proposal May 21.
The letter also notes the recommendation last week by Institutional Shareholder Services in favor of the Sprint Nextel offer, which states “The current [Sprint Nextel] offer falls within an appropriate valuation range as determined by evaluating independent analyst price targets, relative share price premia, and precedent transactions for similar spectrum. … Because the sales process appears to have been both extensive and well-known in the industry; [Clearwire’s} business is increasingly unviable on a stand-alone basis; the company requires interim financing from Sprint to fund operations and satisfy interest payments…a vote for the transaction is warranted.”
However investor services were in general mixed in their view of the deal, with some also recommending investors vote against the Sprint Nextel deal.
Sprint Nextel’s offer, which was initially accepted by Clearwire late last year, was usurped by Dish Network earlier this year, which came in with an offer that it claimed was superior to the Sprint Nextel deal. However, Dish seems to have moved somewhat past the Clearwire deal having recently put in a $25.5 billion bid to acquire a 68% stake in Sprint Nextel, countering a current offer by Softbank that is looking to acquire a 70% stake in Sprint Nextel for $20.1 billion. Sprint Nextel has noted that its pending acquisition of Clearwire is linked to its own acquisition by Softbank.
Clearwire formed a “special committee” to review both offers, with that committee coming back earlier this month in favor of the Sprint Nextel offer. Despite weakening operational results and the threat of running out of cash before the end of the year, Clearwire is seen as a valuable commodity it the wireless space due to its deep spectrum holdings in the 2.5 GHz band. Estimates have those holdings in excess of 150 megahertz across most of the country, which has garnered interest from some operators. While the 2.5 GHz band is not seen as ideal for broad coverage, that band could provide carriers with the ability to provide much-needed capacity in densely populated areas.
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