Dish Raises Its Bid For Clearwire Right Before Shareholder Vote

by Trefis Team
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Dish Network (NASDAQ:DISH) raised its buyout offer for Clearwire to $4.40 per share, valuing the wireless service provider at $6.5 billion. [1] Earlier last week, Sprint (NYSE:S) had raised its bid to $3.40 per share. [2] Sprint already owns a majority of Clearwire and wants to acquire an additional 49% stake. Earlier this week, Sprint-Softbank merger deal received national security clearance. (Sprint-Softbank Deal Receives National Security Clearance Ahead Of Shareholder Vote, Trefis, May 29, 2013) Softbank is also interested in the valuable spectrum of Clearwire and has made an offer to acquire Sprint. Dish’s new offer for Clearwire, which is 30% higher than that of Sprint,  highlights the satellite service provider’s urge for entering into the wireless arena. In light of Dish’s new offer, it will be interesting to see how this story unfolds as Clearwire shareholders vote on Sprint’s offer this Friday.

See our complete analysis for Dish Network

Dish And Clearwire

Dish has a handful of reasons for such aggressive bids it has made recently into the wireless arena. The company has been acquiring spectrum for some time now, and it needs a wireless carrier that can bring that pool of valuable assets to use. Moreover, the company faces a Federal Communications Commission (FCC) deadline to buy or build a cellular network. That’s why the company has been chasing Sprint, which could offer a ready to use infrastructure instead of spending billions of dollars and lot of time on building its own network. Finally, the U.S. pay-TV market is saturated and Dish sees growth in wireless and bundling options.

Dish said that it is looking to buy all of Clearwire’s outstanding shares. However, it would accept a deal for anything above 25% of the total stock. The company also wants to designate at least three seats on Clearwire’s board and additional seats if it acquires a bigger stake. [1] Clearwire on the other hand is facing a cash crunch and needs at least $1.7 billion to keep operating. This is one the primary reasons why it has been in an urgency to complete a deal. In order to fund Clearwire operations, Dish said it would provide financing of $80 million a month, a structure similar to what was offered by Sprint. [1]

Clearwire owns valuable and underexploited spectrum, which could potentially offer strong growth in the future for either of the investors. The bidding war may not be over yet and Sprint may top Dish’s bid. Meanwhile, Dish has yet again made it difficult for Softbank to acquire Sprint. All eyes will now be on May 31, when Clearwire’s shareholders vote on Sprint’s offer.

Our price estimate for Dish Network stands at $38, roughly in line with the market price.

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Notes:
  1. DISH Network Announces Tender Offer in Letter to Clearwire Board of Directors, Dish Press Release, May 29, 2013 [] [] []
  2. Sprint Submits Increased Offer for Clearwire, Sprint Press Release, May 21, 2013 []
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