Sprint, Clearwire Agree to Sweetened Offer

Phone Giant Will Pay $2.2B For Shares Not Already Owned

After an earlier attempt to buy the remaining 49% of Clearwire it did not already owned fell short, Sprint upped the offer and won its prize, agreeing to acquire the remaining shares of the WiMax pioneer Monday in a deal valued at $2.2 billion.

Sprint launched a bid last week to acquire the remaining stake in Clearwire last week for $2.90 per share, or about $2.1 billion. But that deal seemed to fall on deaf ears to investors, who pushed Clearwire stock past the $3 mark in the hopes a more deep-pocketed suitor would make a move.

Sprint rose to the task, increasing its bid to $2.97 per share, which appeared to be enough to appease Clearwire’s board as well as its own new majority owner – Japanese wireless giant Softbank.

Some analysts had doubted a competing bid would come in because Sprint is Clearwire’s largest customer and already owns a 51% stake in the company, which was expected to discourage other offers.

Clearwire shareholders, who still need to approve the deal, appeared to see the writing on the wall, as shares in the WiMax pioneer fell about 13.7% (46 cents) to $2.91 each in Monday trading.

“Sprint is uniquely positioned to maximize the value of Clearwire’s spectrum and efficiently deploy it to increase Sprint’s network capacity,” Sprint CEO Dan Hesse said in a statement. “We believe this transaction, particularly when leveraged with our SoftBank relationship, is further validation of our strategy and allows Sprint to control its network destiny.”

In a statement, Clearwire CEO Erik Prusch said the WiMax pioneer had been reviewing its strategic alternatives over the past two years and a special committee of independent directors had evaluated all of them. After a rigorous process, he said, Clearwire’s board of directors determined the Sprint offer “is the best path forward.”

Sprint had been expected to make a play for the remainder of Clearwire ever since October, when it agreed to a $20.1 billion buyout offer from Japanese wireless giant Softbank.  Softbank has been a big proponent of WiMax technology and obtaining full control of Clearwire was said to be a key part of its Sprint deal.

Comcast, Time Warner Cable, Sprint, Google, Intel and Bright House initially invested in Clearwire in 2008, contributing a combined $3.2 billion. But since that time several partners have dropped out, opting to take a huge discount on their original investment. Both Time Warner Cable and Google sold their Clearwire stakes earlier this year, with the cable operator taking $1.37 per share, 88% less than its original investment.  Google also took a big hit, selling its stake for $2.26 each or 87% less than it originally paid.

In September, Comcast said it would convert its Class B Clearwire stake to Class A common shares, the first step in a sale. The cable companies invested in Clearwire to secure a wireless broadband play, and though Clearwire did build out several markets, it soon ran into cash problems and was overshadowed by another technology – LTE – which has since dominated the wireless broadband space.
Earlier this year, Clearwire announced plans to build an LTE network.
Clearwire said it received commitments from Comcast, Intel and Bright House Networks to vote their shares in support of the transaction. SoftBank has also provided its consent to the transaction.

The deal is expected to be completed by mid-2013.

Citigroup Global Markets Inc. acted as financial advisor to Sprint and Skadden, Arps, Slate, Meagher & Flom LLP and King & Spalding LLP acted as counsel to Sprint. The Raine Group acted as financial advisor to SoftBank Corp. and Morrison Foerster LLP acted as counsel to SoftBank. Evercore Partners acted as financial advisor and Kirkland & Ellis LLP acted as counsel to Clearwire. Centerview Partners acted as financial advisor and Simpson Thacher & Bartlett LLP and Richards, Layton & Finger, P.A. acted as counsel to Clearwire’s special committee. Blackstone Advisory Partners L.P. advised Clearwire on restructuring matters. Credit Suisse acted as financial advisor and Gibson Dunn & Crutcher LLP acted as counsel to Intel.