Clearwire Corp. has dumped its merger plan with Sprint Nextel Corp. in favor of a higher bid from Dish Network Corp.
Its announcement Wednesday pre-empted a shareholder vote set for Thursday on Sprint’s offer to buy the roughly 49 percent of Clearwire it doesn’t already own. The merger is a key part of Sprint’s plan to better compete against Verizon, AT&T and T-Mobile.
Clearwire is now telling its shareholders to vote against Sprint’s deal on the new vote date of June 24. The board previously had recommended that they vote for Sprint’s deal.
Sprint’s offer of $3.40 a share had been increased from an original bid of $2.97 a share.
But Dish, which also is battling Sprint’s intended deal with Tokyo-based SoftBank Corp., had outbid Sprint. Late last month, it offered to buy shares directly from Clearwire shareholders at $4.40 each in what is called a tender offer.
Shares of Clearwire closed Wednesday at $4.37, up 2 cents, ahead of the Clearwire announcement.
Clearwire’s board officially recommended that all of its shareholders tender their shares to Dish at $4.40 a share.
“We appreciate Clearwire’s recognition of the superior value that we are able to deliver its stockholders,” Bob Toevs, a Dish spokesman, told Bloomberg News.
The move pressures Sprint to consider offering a new bid for the remaining shares of Clearwire.
In a statement, Sprint said it would evaluate Clearwire’s recommendation to its shareholders while deciding how to respond.
Sprint also said it would enforce the rights it has as a shareholder and as a business partner with Clearwire.
“Sprint is evaluating today’s statement from Clearwire’s board and will review any corresponding filings before determining its next steps,” its statement said. “Sprint continues to have every intention of enforcing its governance rights. All commercial agreements, including network and customer agreements, will be honored and enforced as it regards our ongoing relationship with Clearwire.”
Dish on Wednesday extended its tender offer to buy shares until July 2. It had been set to expire Friday. It also said that 245,411 shares had been tendered through Tuesday. Clearwire has 699.2 million shares out.
“The economics of it were so much better than Sprint’s prior offer,” Gerard Hallaren, an analyst at Janco Partners Inc., told Bloomberg. “I suspect Dish will get a good position in Clearwire.”
No one, however, is expecting Sprint to sell its Clearwire shares to Dish, said Berge Ayvasian, an industry consultant at HeavyReading.com.
Clearwire and Sprint have been working together since 2008 to deliver cellular service to consumers, but the relationship has been rocky at times. Sprint also has been providing funding to a financially shaky Clearwire.
Clearwire also has valuable, largely underused wireless spectrum that is important to Sprint’s plans to compete with rivals AT&T, Verizon and T-Mobile.
Wireless spectrum is the licensed airwaves that carry cellphone calls, streaming video, text messages and other things that smartphones do.
Analysts have said Sprint probably could still accomplish what it wants to do with Clearwire even if it doesn’t gain full ownership.
Ayvazian said that might change if Dish, led by its determined chairman, Charlie Ergen, becomes the other big owner of Clearwire. For example, he said, Dish might be able to acquire 30 percent or so of Clearwire. It has conditioned its offer to shareholders on getting at least 25 percent of its shares.
Dish has its own spectrum but could use more. Also, it has no network on which to use its spectrum and Clearwire has a network, though it needs expansion.
“That leads me to a breakup of Clearwire,” Ayvazian said.
He said Ergen might seek to take some of the spectrum and the network Clearwire has built, leaving Sprint with most of the spectrum.
Sprint, he said, may be willing to agree to a breakup of Clearwire to settle its running battle with Dish.
Dish has been trying to buy Sprint out from under SoftBank, which has had a deal since October to buy 70 percent of Sprint for $20.1 billion. SoftBank raised its offer to $21.6 billion for 78 percent of Sprint on Monday.
Sprint shareholders had been set to vote Wednesday on the original SoftBank deal, but the vote was put off until June 25.
Company officials dutifully gathered Wednesday morning in Overland Park for the meeting, which ended almost as quickly as it began.
At 10 a.m., Charlie Wunsch, chief legal officer for Sprint, showed his cellphone to the few assembled at the Ritz Charles event center and said it was time to start.
Wunsch gave a quick description of events and then checked his phone.
“I declare the meeting officially adjourned at,” Wunsch said, pausing to look again at his phone, “10:01 on June 12, 2013.”
By holding Wednesday’s meeting and then adjourning it, Sprint can reconvene within 30 days for the SoftBank vote without going through possibly weeks of delays to again properly notify shareholders.