The bidding for control of Sprint Nextel Corp. lives on but under tougher conditions for upstart bidder Dish Network Corp.
By MARK DAVIS
The Kansas City Star
Overland Park-based Sprint has given the satellite television company one week to top a new merger agreement with Tokyo-based SoftBank that was announced late Monday. The revised deal offers $21.6 billion for 78 percent of Sprint and puts new and more expensive hurdles in the satellite television companys way.
Dish officials havent said whether the company plans to boost its bid, only that Sprint has tremendous value. Though facing a deadline of next Tuesday, Dish has shown a preference for disruption and some analysts are not counting them out.
SoftBank raised its price after nine months of standing pat on its $20.1 billion deal to buy 70 percent of the nations third-largest telecommunications company.
Sprints shareholders were set to vote on that offer Wednesday, though the company is expected to adjourn the session without taking action. A yes vote would have ended Dishs chances.
SoftBank calculated its chances and, instead of calling the bet, kicked more money into the pot.
The deal really was at risk, said Berge Ayvazian, telecommunications analyst at HeavyReading.com. They wouldnt have blinked otherwise.
Analyst Jennifer Fritzsche at Wells Fargo, in a note to clients, said SoftBanks revised bid may carry the day. In our view this move should be enough to get this deal done, Fritzsche wrote.
SoftBank, however, cut back by $3 billion the amount of cash it will pour into Sprint once the deal closes.
The companies battle moves to another venue Thursday. Sprints bid to buy the roughly 49 percent of Clearwire Corp. it doesnt own goes to a vote of the other shareholders. Sprint wants full ownership of its wireless network partner, but Dish may have the top bid there.
Mondays revised offer from SoftBank comes after the company stood pat following Dishs $25.5 billion bid for all of Sprint in April.
Analysts had said Dishs bid, though higher and appealing some large Sprint shareholders, had a debt problem.
Dish looks like it could be a better deal on the surface, said Donna Jaegers, an analyst at D. A. Davidson & Co. But it leaves you with a very indebted company.
Now that SoftBank has sweetened its payout to Sprint shareholders, a vote to seal the deal is scheduled for June 25.
Sprint shares gained 17 cents Tuesday to close at $7.35.
In an important sweetener for Sprints existing owners, shareholders will get more cash for their stock.
Shareholders stand to collect $16.6 billion of the total $21.6 billion price tag under the revised terms. Under the previous offer, they would have received $12 billion.
Cash had been one stumbling block for some Sprint shareholders when comparing SoftBanks offer with the rival bid Dish made in April. Dish was paying out more cash.
Some unhappy Sprint shareholders had sued to delay Wednesdays vote, arguing in part that the SoftBank deal was unfair. Johnson County District Judge Thomas Sutherland has put off his decision, given Sprints decision to delay the vote itself.
The unhappy shareholders are evaluating the new bid, attorney Steve Six said Tuesday.
If Dish remains in the hunt, it faces new obstacles.
Sprint agreed to a bigger break-up fee with SoftBank $800 million if the deal fails rather than $600 million. In addition, Sprint now may have to to reimburse SoftBank for up to $200 million in fees and expenses, compared with $75 million previously.
Both features essentially make any rival bid that much less valuable to Sprint, forcing a rival bidder Dish to pay up.
SoftBank and Sprint also made it tougher for Sprint to find any rival bid superior to SoftBanks new deal.
And Sprint agreed to create a new shareholder rights plan before Dishs deadline to rebid runs out. This could stop Dish from skipping talks with Sprint and buying shares directly from shareholders.
Dish made just such an offer to Clearwire shareholders. Its offering $4.40 a share, compared with Sprints $3.40 a share.
Kevin Smithen, an analyst at Macquarie Equities Research, said in a note to clients he expects Sprint will raise its Clearwire offer. He said Clearwire likely will delay its vote until June 26, the day after Sprints scheduled vote on the SoftBank deal.
Shares of Clearwire gained 8 cents on Wall Street, closing at $4.35.
Higher bid, less money
If there is a loser under the new deal, it is Sprints wallet.
SoftBank fattened it last fall with a $3.1 billion down payment shortly after the companies announced the original deal in October. Sprint quickly put the money to work.
It helped fund Sprints network upgrade project, it allowed Sprint to work out a deal with a smaller wireless carrier and some of it helped shore up Clearwires shaky finances.
SoftBank promised an additional $4.9 billion for Sprint once the deal closed.
Mondays cash shuffle cuts that by $3 billion. Instead of using that money to bolster Sprints finances, SoftBank will be paying it to shareholders.
SoftBank also is adding $1.5 billion more to the deal to further boost the cash that shareholders take home.
In announcing their new deal, Sprint and SoftBank said that the wireless carrier can make do with less. Though still losing money, Sprints finances have improved since October, and it has made progress on its network upgrade project.
Nine months of working together also turned up cost and investment savings that the companies said werent evident when the first deal was struck. For example, both companies buy cell phones to deliver to subscribers and network equipment. Buying together will allow them to negotiate better prices form the companies that make the equipment.
To reach Mark Davis, call 816-234-4372 or send email to firstname.lastname@example.org.