Sprint Nextel Moves to Block Dish-Clearwire Deal

Michael Teague  |

The bizarre love triangle that has developped over the past two months between Sprint Nextel (S), Dish Network (DISH), and wireless communications company Clearwire (CLWR) took yet another twist late on Monday as Sprint filed suit to block the deal that seems otherwise near completion between Dish and Clearwire.

Only last week, it was possible to have some sympathy for Sprint, the nation's third largest wireless service provider, who has been trying to complete a merger deal with Japanese wireless firm Softbank. Dish Network is a rival bidder for Sprint in that transaction, and though Sprint and Softbank had agreed and seemed intent on a buyout as early as last year, Dish showed itself ready to throw the kitchen sink at the deal in order to prevent it.

The satellite cable company, intent on expanding its business beyond the increasingly precarious pay-for-TV model to include the provision of bundled cable/telephone packages to customers, even went as far as to launch what could be called a xenophobic campaign against Softbank, creating a website and taking out newspaper advertisments (particularly in the Washington, D.C. area) that shamelessly exploited the national security card by accusing the Japanese company of ties to Chinese government intelligence and hacking.

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While the whole scuffle over ownership of Sprint was taking place, another bidding war has been underway, this one between Sprint and Dish over the $1.26 billion Clearwire. At first glance, there would seem to be no reason to fight over such a tiny company that trades at $5 per share and has actually lost over $600 million over the past year. Clearwire's attraction, however, is the ammount of LTE-ready spectrum the company is currently sitting on and is ready to make available this summer.

Dish wants to buy Clearwire, and Clearwire's board seems to agree. The deal, as of Dish's most recent offer, stands at $4.40 per share. To make matters more delicate, Sprint already owns about 50 percent of Clearwire, and offered the company $3.40 per share to purchase the rest.

Sprint's objection to the deal, as per Monday's filing with the Deleware Court of Chancery, is that Dish cannot complete its buyout of Clearwire without the approval of 75 percent of the company's shareholders. Sprint is making the additional claim that the terms of the deal violate Clearwire's charter, as well as an equity-holders' agreement.

Sprint already made this claim in a letter to Clearwire shareholders at the beginning of this month, and Dish has responded with the assertion that its proposal was "carefully designed to comply with applicable law and the existing rights of Clearwire stockholders including Sprint."

Sprint's shares were up 1.25 percent in midday trading at $7.34, while Dish had advanced 1.35 percent to $39.44. Shares for Clearwire edged down about 0.50 percent to $4.61.

[Image via Flickr]

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