We’re seeing Sprint sending some landlords a “Landlord Release Agreement” in connection with Dish Wireless that contains:
Release. Effective as of the Assignment Date, Landlord, for Itself and its affiliates, successors and assigns, does hereby forever release and discharge Tenant and its affiliates, partners,
employees, agents, successors and assigns of any and all liabilities and obligations arising from or relating to the Lease from and after the Assignment Date.
Most savvy cell site landlords will recognize the inherent dangerto their lease security by agreeing to this little stinker clause.
If you receive any sort of release agreement from a wireless carrier (either directly or via one of their agents), take the time before you sign to get a qualified legal opinion regarding the terms of that agreement. In some or many cases, the true benefit flows solely to the exiting carrier, not to the landlord!
According for FierceBroadbandWireless, which has a good eye for such things, T-Metro (really, T-Mobile and its recent meal, MetroPCS) might be getting hungry again. This time it may be looking to eat a bug, namely a Cricket (Wireless), which is the trade name for Leap Wireless.
Oddly, I’ve been saying about the same thing about T-Mobile and MetroPCS for a while, now.
Of course, your parent(s) taught you not to eat off the floor, so it’s possible Dish might make a running Leap to eat the same bug.
For T-Mobile, this meal would squarely in the middle of its favored food groups.
Leap’s PCS system–and as importantly its customers’ handsets–are generally compatible with T-Metro’s network. Better yet, there very little overlap between the MetroPCS and Cricket networks.
How do I know about the minimal overlap?
Using home coverage maps available on the web as a yardstick, I imported Cricket’s and MetroPCS’s maps into Photoshop and overlaid then one atop the other.
Using the Photoshop Multiply tool, it was easy to see that the only basic overlap between the two networks is in central California with much lesser overlaps in Las Vegas, small parts of Georgia, and even smaller parts of Texas.
Who says everything is bigger in Texas? Oops. Sorry…
In the map, purple is MetroPCS’s home coverage; green and orange belong to Cricket; the dark green shows the overlap of the two networks.
Now you can see why Cricket’s frequencies (remember, this is all about frequencies for 4G+ uses, not about pops) complement MetroPCS’s. Both complement T-Mobile’s footprint.
What about Dish…the recent near-spoiler of the Softbank-Sprint-Clearwire deals?
I just don’t see it.
Yeah, Dish has a whole boatload of money burning holes in the bottom of their satellite receivers, but why spend the cash on little green dots and orange when the purple’s already dished on to on someone else’s plate (or dish)?
The smarter move would be for Dish to make a run on mama T-Mobile herself, with a pretty good national network already in place, and Deutsche Telekom an apparently willing on-again, off-again seller.
While I don’t rule out Dish, I simply don’t think it makes much sense for them to be a buyer of this bug.
Perhaps Dish will be a spoiler, again.
Time will tell. Just listen for the gurgling stomachs.
To nobody’s surprise, the FCC has approved the Softbank+(Sprint+Clearwire) deals. Here’s the press release just sent by Sprint…or should I say, SoftSprint:
Federal Communications Commission Approves SoftBank’s Investment in Sprint and Sprint’s Acquisition of Clearwire
OVERLAND PARK, Kan., BELLEVUE, Wash. & TOKYO (BUSINESS WIRE), July 05, 2013 – The Federal Communications Commission announced today that it has voted unanimously to approve the applications filed by SoftBank (TSE: 9984), Sprint (NYSE: S) and Clearwire (NASDAQ: CLWR) related to their transactions announced last year.
This decision completes all Federal government reviews of both SoftBank’s investment in Sprint and Sprint’s acquisition of Clearwire. Sprint’s shareholders approved the SoftBank transaction with Sprint on June 25th. Clearwire’s shareholders are scheduled to vote on the Sprint transaction with Clearwire, which has been recommended by Clearwire’s Board of Directors, on July 8th.
“We would like to thank Acting Chairwoman Clyburn, Commissioners Rosenworcel and Pai, as well as the staff of the FCC for their thorough review of these transactions,” said Sprint CEO Dan Hesse. “Just two years ago, the wireless industry was at the doorstep of duopoly, but with these transformative transactions, we are one step closer to a stronger Sprint which will better serve consumers, challenge the market share leaders and drive innovation in the American economy.”
“We appreciate the forward thinking, consumer focused stance the FCC has taken by approving the proposed transaction. As the company that built America’s first nationwide 4G network, Clearwire looks forward to joining Sprint and deploying an even faster and richer 4G experience for consumers across the country,” said Clearwire CEO and President Erik Prusch. “This is the right transaction at the right time to best deploy Clearwire’s spectrum to create a broadband network that will bring additional services and alternatives to wireless consumers.”
“The FCC’s thoughtful review and approval of these transactions represents an important step toward creating a more competitive U.S. wireless marketplace,” said SoftBank Chairman & CEO Masayoshi Son. “SoftBank’s investment in Sprint will bring innovation and increased customer focus, which will enable us to begin creating a true competitor in a market dominated by two companies. We look forward to leveraging the significant talent and resources of the New Sprint to bring innovation and better service to U.S. consumers.”
Sprint, Clearwire and SoftBank anticipate that the transactions will close in early July 2013, subject to the remaining closing conditions.
According to a Bloomberg report today citing unnamed sources, two of the three sitting FCC Commissioners have approved the big TwoFer: Clearwire’s takeover by Sprint, and Sprint’s sale of itself to Softbank.
The decision, if in fact it has been made, has not yet been posted to the FCC’s web site.
Presuming the truth of the Bloomberg story, no one should be surprised by this massive frequency consolidation given Sprint’s Network Vision project. These deals have been about access to bandwidth.
Sprint reports that about 98% of its shareholders voted for the deal. The FCC approval seems like it will be pro forma.
Now, with the SoftSprint and SprintClear deals done, I suspect Dan Hesse is considering when and how he’ll exit SoftSprint, if he hasn’t already already worked out the details of that deal with Masayoshi Son.
Actually, I’d bet Dan’s exit plan is already set down on paper, and it says something like, ‘Dan, thanks for the hard work. We’ll have you stay on as a special consultant to SoftSprint for the next three years…yeah, we’ll call it a consulting gig. You’ll start about two weeks after the FCC approves the deal. Something like $5M a year, plus a really nice parting gift.’
At least Dan will be able to keep his SAG-AFTRA membership. Maybe part of the consulting gig will be that Dan keeps on making commercials for his new boss.
Here’s Sprint’s press release from this morning:
OVERLAND PARK, Kan. (BUSINESS WIRE), June 25, 2013 – Sprint Nextel Corporation (“Sprint”) (NYSE: S) shareholders voted today to approve and adopt the previously announced merger agreement providing for a substantial investment by SoftBank Corp. (“SoftBank”) (TSE: 9984). Sprint shareholders overwhelmingly approved the deal, with approximately 98 percent of the votes cast at today’s special shareholders meeting voting in favor of the merger agreement, representing approximately 80 percent of Sprint’s outstanding common stock as of April 18, 2013, the record date for the special meeting.
“Today is a historic day for our company, and I want to thank our shareholders for approving this transformative merger agreement,” said Sprint CEO Dan Hesse. “The transaction with SoftBank should enhance Sprint’s long-term value and competitive position by creating a company with greater financial flexibility.”
Consummation of the Sprint-SoftBank transaction remains subject to the receipt of the Federal Communications Commission approval. Sprint and SoftBank anticipate the merger will be consummated in early July 2013.
As previously announced, Sprint stockholders will have the option to elect to receive cash in the amount of $7.65 or one of New Sprint common stock for each share of Sprint common stock owned by them (subject to the previously disclosed proration provisions in the merger agreement). The total cash consideration available to Sprint stockholders is $16.64 billion. Pro forma for the transaction, the current Sprint stockholders’ resulting equity ownership in a stronger, more competitive New Sprint will be 22 percent while SoftBank will own approximately 78 percent. Sprint and SoftBank have previously mailed to Sprint shareholders forms of election and related instructions and established 5:00 p.m., New York time, on July 5, 2013 as the election deadline, subject to extension.
So, in the latest chapter of the SoftSprint-Clearwire-Dish matrimonial saga, it looks like SoftSprint will indeed take Clearwire to the alter.
Yesterday, Sprint (which had sued Clearwire just three days before to block the sale to Dish) decided to up its offer from $3.40 to $5.00, topping Dish’s offer of $4.40.
Just to make sure that Clearwire doesn’t take the ring off the finger one more time, Sprint’s amended marriage proposal contract with Clearwire provides for Clearwire to pay Sprint a break-up fee of $115 million should Clearwire get cold feet…again.
I have to imagine that there were some very interesting conversations between Japan and Kansas about what would happen to the value of the SoftSprint deal if Clearwire went off and married Dish. Soft needs Clearwire’s frequency allotments to make its Sprint purchase ‘reasonable’…it didn’t need cash nearly as much. Soft so much as signed that point exactly when it made noises yesterday about making a run for T-Metro if the SofSprint deal collapses.
Lest anyone be unclear:
Clearwire is all about licensed frequencies for LTE; not WiMax, facilities or customers;
Sprint only makes sense with Clearwire’s licensed frequencies; forget about the cash;
SoftSprint only makes sense with Sprint’s sites being upgraded to Network Vision and getting control of Clearwire’s licensed frequencies.
It didn’t take long for Dish to fire off a public response to Sprint’s compliant to block Dish’s takeover of Clearwire. Here’s what Dish had to say, short and sweet:
“Sprint’s lawsuit is a transparent attempt to divert attention from its failure to deal fairly with Clearwire’s shareholders, as well as to exploit its majority position to block Clearwire’s shareholders from receiving a fair price for their shares. DISH is confident that its superior offer, which has been unanimously recommended by the Clearwire Board, including the majority appointed by Sprint, will be upheld and Clearwire shareholders will be free to realize the 29 percent premium represented by the DISH offer.”
Sprint today filed suit in the Court of Chancery in Delaware to block the sale of Clearwire to to Dish Network. The 45-page verified complaint aims to not only stop the sale, but to ding Dish for tortious interference with Sprint’s rights under its merger agreement with Clearwire.
Most telling in the complaint is Sprint’s assertion that “DISH wants spectrum.” (para. 3.) How very true of both suitors.
Sprint’s complaint is summarized in the press release below.
Below the press release is the “Nature of the Action” section of the complaint. Below that is a link to the 45-page complaint.
As of the initial posting of this message, neither Dish nor Clearwire has yet released any public comments on Sprint’s complaint. I’m sure Dish’s reply will be most entertaining.
June 17, 2013
Sprint Files Lawsuit Against DISH Network Corporation and Clearwire Corporation Citing the Illegality of the DISH Tender Offer for Clearwire
If Completed, Tender Offer Would Violate Delaware Corporate Law, Sprint’s Bargained-For Rights and the Rights of the Strategic Investors Under the Charter and Equity Holders Agreement
Lawsuit Contends that the Tender Offer is Structurally and Actionably Coercive
OVERLAND PARK, Kan. (BUSINESS WIRE), June 17, 2013 – Sprint (NYSE:S) announced today that it has filed a complaint in the Delaware Court of Chancery against DISH Network Corporation (NASDAQ:DISH) and Clearwire Corporation (NASDAQ: CLWR) asking the Court to prevent the consummation of the DISH tender offer for Clearwire. Sprint believes the transaction violates Delaware law and the rights of both Sprint and Clearwire’s other strategic investors under Clearwire’s charter and under the Equity Holders Agreement (“EHA”). In addition to seeking to enjoin the tender offer, Sprint’s lawsuit seeks to rescind certain parts of the tender offer agreement and seeks declaratory, injunctive, compensatory and other relief.
In its complaint, Sprint outlines why DISH’s tender offer violates the rights of Sprint and other Clearwire stockholders under Clearwire’s governing documents and Delaware law. It also details how DISH has repeatedly attempted to fool Clearwire’s shareholders into believing its proposal was actionable in an effort to acquire Clearwire’s spectrum and to obstruct Sprint’s transaction with Clearwire. Among the points the suit makes:
Sprint and the strategic investors invested billions of dollars in cash and assets to form Clearwire. They entered into a shareholders agreement that established their governance rights (the Equity Holders Agreement (EHA)) as to nominating and electing directors, amending the charter and bylaws, issuance of stock, and other governance matters.
Under Clearwire’s charter and the EHA, the DISH Tender Offer (together with the Investors Rights Agreement (IRA) and a related Note Purchase Agreement (the “NPA”)), cannot be completed without the approval of holders of at least 75% of Clearwire’s outstanding voting securities, nor without the approval of Comcast Corp., neither of which approvals have been obtained. Completion of the tender offer without such approvals is unlawful.
DISH’s Tender Offer, if completed, would violate Delaware corporate law and Sprint’s and the strategic investors rights under the Charter and EHA by vesting DISH with a veto power over fundamental corporate events that Delaware law places in the control of the directors or shareholders and that the EHA details how many directors and shareholders are required for action.
The IRA requires Clearwire to place and maintain a number of DISH designees on its board of directors in breach of the provisions in the EHA permitting Sprint to nominate 7 directors, the Significant Investors Group to nominate several other directors, and the nominating committee to nominate the remainder.
The IRA violates the Charter by purporting to grant DISH pre-emptive rights that are explicitly prohibited by the Charter.
The DISH Tender Offer is unlawfully coercive because it threatens to leave non-tendering shareholders holding shares in a company subject to governance deadlocks or substantial damage awards to DISH if Clearwire is unable to deliver on the unenforceable promises set forth in the IRA and NPA.
Sprint is asking for Clearwire’s Charter and the EHA to be enforced by not letting Clearwire sign the IRA or the NPA and by enjoining the tender offer.
Here’s the “Nature of the Action” section of Sprint’s complaint:
1. This action seeks declaratory, injunctive, compensatory and other relief arising from a tender offer launched by DISH for the stock of Clearwire (the “DISH Tender Offer”). The DISH Tender Offer is structurally and actionably coercive and is conditioned upon an agreement with Clearwire that is set to be approved by the Clearwire board of directors (the “Clearwire Board”) that violates and converts the rights of Sprint and other Clearwire stockholders under Clearwire’s governing documents and Delaware law. This action also seeks compensatory relief for DISH’s tortious interference with Clearwire’s performance of its merger agreement with Sprint.
2. Sprint has been a substantial stockholder of Clearwire since its formation in 2008. After lengthy negotiations, on December 17, 2012, Sprint and Clearwire announced a merger agreement whereby Sprint would acquire the outstanding Clearwire stock that it does not already own (the “Sprint Merger Agreement”). Sprint and Clearwire also entered into a financing agreement under which Sprint would provide Clearwire with much-needed financing (the “Interim Financing Agreement”).
3. DISH wants spectrum. Clearwire has spectrum but has struggled financially. Before entering into the Sprint Merger Agreement, Clearwire sought to engage DISH in discussions, but DISH refused to negotiate and did not make a meaningful proposal. After the announcement of the Sprint Merger Agreement, however, DISH feared that by solving Clearwire’s financial problems, a combination of Sprint and Clearwire would eliminate DISH’s negotiating leverage to acquire spectrum on the cheap, so DISH embarked on a plan to tank the merger.
4. Because the Sprint Merger Agreement was conditioned on the approval of a majority of Clearwire’s minority shares, DISH’s strategy focused on fooling Clearwire’s minority stockholders into believing they might obtain a better price from a transaction with DISH. Thus, starting in late December 2012, DISH began making a series of public proposals to make tender offers for a minority position in Clearwire at prices higher than that offered under the Sprint Merger Agreement – in exchange for Clearwire selling DISH key spectrum assets at a bargain price. DISH also insisted that it obtain substantial governance rights from Clearwire. The Clearwire Board rightly recognized that its fiduciary duties did not permit it to sell key assets at a discount in exchange for a tender offer that would benefit only a minority of stockholders, and also rightly recognized that it could not grant DISH the governance rights DISH sought without violating the rights of Sprint and other Clearwire stockholders under Clearwire’s governing documents and Delaware law. So Clearwire repeatedly rejected DISH’s proposals as “not actionable.” DISH appeared to give up on Clearwire and instead turned its attention to making a public proposal to acquire Sprint. Nevertheless, DISH’s repeated public proposals to Clearwire had fooled many Clearwire minority stockholders into believing a higher price might be available from DISH.
5. On May 29, 2013, just two days before Clearwire stockholders were set to vote on Sprint’s proposed merger with Clearwire (the “Sprint-Clearwire Merger”), DISH re-appeared with a publicly announced tender offer at a higher price – the DISH Tender Offer. The DISH Tender Offer was no longer conditioned upon a purchase of spectrum at a bargain price, but was still conditioned upon obtaining governance rights that Clearwire had previously recognized it had no power or right to give. Nevertheless, because DISH is successfully fooling Clearwire’s minority stockholders into voting against the Sprint-Clearwire Merger, leaving Clearwire with no solution to its looming financial crisis, the Clearwire Board panicked and its changed position.
6. Thus, Clearwire reversed course and intends to execute agreements containing the very same governance provisions that it previously recognized it could not legally grant. As described further below, Clearwire is set to enter into an Investor Rights Agreement (the “IRA”) and a Note Purchase Agreement (the “NPA”) with DISH that violate Sprint’s rights under an Equityholders’ Agreement entered into by Sprint, Clearwire and others in 2008 (the “EHA”) and also violate Delaware law and Clearwire’s governing documents – facts previously acknowledged by the Clearwire Board and communicated to DISH.
7. Execution and delivery of the IRA is a condition to the DISH Tender Offer. The IRA purports to grant DISH governance rights, including the purported right to force the Clearwire Board to nominate a slate of directors with guaranteed DISH representation, the purported right to veto amendments to Clearwire’s charter (the “Clearwire Charter”) and bylaws, the purported right to veto any change of control of Clearwire, and purported preemptive rights over any new issuance of Clearwire securities, with certain exceptions. The IRA is invalid and unenforceable because it violates Sprint’s rights under Delaware law and the EHA, which is incorporated into the Clearwire Charter.
8. The NPA is also invalid and unenforceable. Clearwire intends to enter into the NPA in connection with the DISH Tender Offer. The NPA purports to compel Clearwire to issue either exchangeable or non-exchangeable notes, with a structure designed to coerce Sprint to vote to amend the Clearwire Charter. The issuance of exchangeable notes by Clearwire would not be permitted without an amendment to the Clearwire Charter, which could not be accomplished without Sprint’s approval. The nonexchangeable notes (that Clearwire would issue to DISH if Sprint does not approve an amendment to the Clearwire Charter) pay an enormous 12% interest rate, require a commitment fee payable in cash, and carry priority in bankruptcy. Combined with DISH’s other holdings of Clearwire debt, the non-exchangeable notes would give DISH the ability to drive Clearwire into bankruptcy so DISH can take control of Clearwire’s spectrum assets. Thus, not only are Sprint and the other parties to the EHA being deprived of their preemptive rights under the EHA, but Sprint is also being coerced into amending the Clearwire Charter to allow for the issuance of more Clearwire shares in order to avoid the issuance of the non-exchangeable notes.
9. All that is bad enough. But the DISH Tender Offer is also structured to coerce Clearwire’s minority stockholders, to the detriment of Sprint, to tender their stock to DISH or else be left holding stock in a corporation that will be handicapped by unlawful corporate governance restrictions, onerous debt provisions, and potentially be subject to massive money damages claims payable to DISH – an entity which has everything to gain from a failure of Clearwire. Because Sprint owns a majority of Clearwire stock and, as stated, is not a seller, the DISH Tender Offer cannot be followed by a back-end merger with the same consideration and therefore is structurally coercive.
10. As a result, this action seeks equitable relief to prevent consummation of the DISH Tender Offer, and to enjoin or rescind the execution and delivery of the IRA and the NPA.
11. This action also seeks compensatory and other relief to remedy DISH’s wrongful interference with Sprint’s contractual rights, economic advantage and business relations. DISH intentionally and improperly interfered with the performance of the Sprint Merger Agreement and the Interim Financing Agreement between Clearwire and Sprint, thereby preventing performance, causing performance to be more expensive and burdensome, and ultimately threatening the wrongful termination of the Sprint Merger Agreement.
12. Defendants’ acts already have injured Sprint and Sprint’s rights which will further be irreparably injured without immediate relief from this Court.
Separately but related to the Clearwire deal, DISH Network announced earlier today the expiration last Friday of the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) in connection with the tender offer by DISH Acquisition Holding Corporation, a wholly-owned subsidiary of DISH, to purchase all outstanding shares of Class A Common Stock of Clearwire Corporation , including any shares of Class A Common Stock issued in respect of outstanding shares of Class B Common Stock, for $4.40 per share.
For years I’ve been telling my clients that the relationship between Clearwire and Sprint is far from what Sprint has portrayed it to be.
No, Clearwire not a controlled entity or affiliate of Sprint, but rather an arms-length investment by Sprint in Clearwire. For a number of lease transactions over the past few years, this has been a REALLY BIG DEAL that savvy landlords and their counsel have used to reposition their lease negotiations with both Sprint and Clearwire.
Yesterday, Clearwire’s Board of Directors recommended that its shareholders pass on Sprint’s $3.40/share buyout offer in favor of Dish Network’s much sweeter deal at $4.40/share.
Clearwire’s press release yesterday highlights the Dish offer and Sprint’s inferior offer:
Clearwire Special Committee and Board of Directors Unanimously Recommend Stockholders Tender Into DISH Network $4.40 Per Share Tender Offer
DISH Offer is in Best Interest of Class A Stockholders
Files Schedule 14D-9 with SEC Recommending Stockholders Tender Their Shares Pursuant to DISH Tender Offer
Changes Recommendation to Against $3.40 Per Share Sprint Merger
Company Plans to Adjourn Special Meeting of Stockholders; Rescheduled Meeting to be Held June 24, 2013
BELLEVUE, Wash., June 12, 2013 (GLOBE NEWSWIRE) — Clearwire Corporation (Nasdaq:CLWR) (“Clearwire” or the “Company”) today announced that its board of directors, based on the unanimous recommendation of the Special Committee consisting of independent, non-Sprint-affiliated directors, has unanimously recommended that stockholders accept and tender into DISH Network Corporation’s (Nasdaq:DISH) (“DISH”) cash tender offer to acquire all outstanding common shares of Clearwire at the previously announced price of $4.40 per share. The DISH tender offer has been amended and now is currently set to expire at 12:00 midnight, Eastern time, at the end of July 2, 2013, unless extended or terminated in accordance with the terms and conditions of the offer. The Company’s board of directors, also based on the unanimous recommendation of the Special Committee, also unanimously recommended that stockholders now vote against the $3.40 per share Sprint merger and related matters.
The DISH tender offer is subject to various conditions, including the tender of more than 25% of the fully diluted voting stock in Clearwire and the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Pursuant to the discretionary authority granted to the chairman of the meeting by Clearwire’s bylaws, the Company plans to adjourn its Special Meeting of Stockholders, which is currently scheduled to be held at 10:30 a.m. Pacific time on Thursday, June 13, 2013, without conducting any business. The Company plans to reconvene the Special Meeting of Stockholders on Monday, June 24 at 9:00 a.m. Pacific time at the Kirkland Performing Arts Center, 350 Kirkland Avenue, Kirkland, Washington, 98033. The record date for stockholders entitled to vote at the Special Meeting remains April 2, 2013.
The Company today filed with the Securities and Exchange Commission (“SEC”) a Solicitation/Recommendation Statement on Schedule 14D-9 and also plans to file a supplement to its proxy statement, each of which explains the matters described in this press release in greater detail. Stockholders are encouraged to read the Schedule 14D-9 filing and proxy supplement, which will be available on the SEC’s website, www.sec.gov.
Evercore Partners is acting as financial advisor and Kirkland & Ellis LLP is acting as counsel to Clearwire. Centerview Partners is acting as financial advisor and Simpson Thacher & Bartlett LLP and Richards, Layton & Finger, P.A. are acting as counsel to Clearwire’s Special Committee. Blackstone Advisory Partners L.P. has advised the company on restructuring matters.
This should be causing some very loud rumblings at Softbank in Japan, and at Sprint’s HQ in Overland Park, Kansas. Very loud rumblings, indeed…
As I previously reported, (Soft)Sprint is trying to buy up the shares of Clearwire not already owned by Sprint. They offered $2.97 per share.
Enter, now, Dish Network with an unsolicited offer to purchase Clearwire at $3.30 per share.
Needless to say, Sprint’s not too impressed with the Dish offer.
Now it’s up to Clearwire’s “Special Committee” to evaluate the offers (and any other interlopers who happen along) to pick the winner.
Here’s Clearwire’s press release from a couple of hours ago:
January 8, 2013
Clearwire Corporation Provides
BELLEVUE, Wash., Jan. 8, 2013 (GLOBE NEWSWIRE) — Clearwire (Nasdaq:CLWR) today announced that it has received an unsolicited, non-binding proposal (the “DISH Proposal”) from DISH Network Corporation (“DISH”). The DISH Proposal, as further summarized below, provides for DISH to purchase certain spectrum assets from Clearwire, enter into a commercial agreement with Clearwire, acquire up to all of Clearwire’s common stock for $3.30 per share (subject to minimum ownership of at least 25% and granting of certain governance rights) and provide Clearwire with financing on specified terms.
The DISH Proposal is only a preliminary indication of interest and is subject to numerous, material uncertainties and conditions, including the negotiation of multiple contractual arrangements being requested by DISH (some of which, as currently proposed, may not be permitted under the terms of Clearwire’s current legal and contractual obligations). It is also subject to regulatory approval.
As previously announced on December 17, 2012, Clearwire has entered into a definitive agreement with Sprint Nextel Corporation (“Sprint”) for Sprint to acquire the approximately 50 percent stake in Clearwire it does not already own for $2.97 per share (the “Sprint Agreement”). Clearwire’s ability to enter into strategic transactions is significantly limited by its current contractual arrangements, including the Sprint Agreement and its existing Equityholders’ Agreement.
The Special Committee of the Clearwire Board of Directors (the “Special Committee”) has determined that its fiduciary duties require it to engage with DISH to discuss, negotiate and/or provide information in connection with the DISH Proposal. The Special Committee has not made any determination to change its recommendation of the current Sprint transaction. Consistent with its obligations under the Sprint Agreement, Clearwire has provided Sprint with notice, and the material terms, of the DISH Proposal, and received a response from Sprint that is described below.
DISH had, prior to the announcement of the Sprint Agreement, provided Clearwire with a preliminary indication of interest solely with respect to acquiring certain of Clearwire’s spectrum assets, on substantially the same pricing per MHz-POP as the spectrum purchase included in the DISH Proposal described below, and entering into a commercial agreement. Although Clearwire worked with DISH prior to the execution of the Sprint Agreement to improve the overall terms of that proposal, the Special Committee of the Clearwire Board determined that the Sprint transaction was, for a number of reasons, a more-attractive alternative for Clearwire’s non-Sprint Class A stockholders than a transaction with DISH at that time and on the terms then-proposed by DISH.
Summary of DISH Proposal
The following is a summary of the material terms of the proposal:
Spectrum Purchase. DISH would acquire from Clearwire spectrum covering approximately 11.4 billion MHz-POPs (“Spectrum Assets”), representing approximately 24% of Clearwire’s total MHz pops of spectrum, for aggregate net cash proceeds to Clearwire of approximately $2.2 billion (the “Spectrum Purchase Price”). The net cash proceeds are prior to any adjustment for potential tax liabilities which are likely to arise from the sale of spectrum assets even after utilizing the existing net operating losses. At DISH’s option, Clearwire would also sell or lease up to an additional 2 MHz of Clearwire’s spectrum to DISH from a channel that is adjacent to the Spectrum Assets at a price to be calculated in the same manner as the Spectrum Assets.
Commercial Agreement. Clearwire would, at DISH’s request, provide certain commercial services to DISH, including the construction, operation, maintenance, and management of a wireless network covering AWS-4 spectrum and new deployments of 2.5 GHz spectrum.
Acquisition of Clearwire Shares; Governance. DISH would make an offer to Clearwire’s stockholders to purchase up to all of Clearwire’s outstanding shares at a price of $3.30 per share in cash. This tender offer would not be dependent on Sprint’s participation, but would be subject to a number of conditions, including DISH: (i) acquiring no less than 25% of the fully-diluted shares of Clearwire, (ii) being granted the right to designate Clearwire board members commensurate with its pro forma ownership percentage, (iii) receiving certain minority protections, including the right to approve material changes to Clearwire’s organizational documents, change of control and material transactions with related parties (unless these transactions were approved by an independent committee of the Clearwire board and, if over a certain threshold, supported by a written fairness opinion from a nationally recognized investment bank) and (iv) receiving preemptive rights. In addition, the DISH Proposal would require Clearwire to terminate the note purchase agreement under which Sprint has agreed to provide interim financing to Clearwire and is conditional upon the consummation of the spectrum purchase and Clearwire being in compliance with the commercial agreement (both as described above).
Spectrum Purchase Price Funding. DISH would pre-fund the Spectrum Purchase Price within three business days of signing through a senior Unsecured PIK Debenture (the “PIK Debenture”) bearing PIK interest at a rate of 6% per annum in the event the Spectrum Assets are sold to DISH or 12% per annum otherwise. Clearwire would be obligated to either apply the proceeds of the pre-funding to reduce outstanding long-term debt through the redemption or repurchase of the 2015 Senior Secured Notes and 2016 Senior Secured Notes of Clearwire Communications LLC or, in the event that a portion of the Network Build Financing described below is unavailable due to the failure to receive shareholder approval, to use an equivalent portion of the proceeds of the PIK Debenture to fund network build-out costs; in that case, any future make up draws on the Network Build Financing following shareholder approval would be applied to reduce debt as provided in this sentence. If Spectrum Assets are not acquired due to a failure to obtain required regulatory approvals, Clearwire would, within 30 days following termination of the spectrum purchase agreement, repay the PIK Debenture plus interest at 6% per annum. If Clearwire is unable to repay the PIK Debenture during this 30 day period, it would be entitled to convert the principal amount and accrued interest on the PIK Debenture into a note on terms comparable to the 2015 Senior Secured Notes previously repaid, having a maturity of December 1, 2015.
Network Build Financing. DISH proposes to provide additional capital to fund a portion of Clearwire’s network build-out through a credit facility for the purchase of exchangeable notes on substantially similar terms to those which Sprint has agreed to provide, subject to cancellation of the Sprint Financing Agreements (as described below).
Deal Protections. DISH expects appropriate deal protections, including a 5-day match right, similar to those included in the Sprint Agreement. DISH would match Clearwire’s termination rights as provided for in the Sprint transaction (including the possible forgiveness of a portion of the exchangeable notes upon certain termination events).
Sprint Financing. DISH has indicated that the proposal will be withdrawn if Clearwire draws on the financing under the Sprint Financing Agreements.
In connection with the Sprint Agreement, Clearwire and Sprint also entered into agreements that provide up to $800 million of additional financing to Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions (the “Sprint Financing Agreements”). Under the Sprint Financing Agreements, Sprint has agreed to purchase, at Clearwire’s option, $80 million of exchangeable notes per month for up to 10 months beginning on January 2, 2013. The DISH Proposal indicates that it will be withdrawn if Clearwire draws on the financing under the Sprint Financing Agreements. As a result, in order to allow the Special Committee to evaluate the DISH Proposal, at the direction of the Special Committee, Clearwire has revoked its initial draw notice and has not received the first $80 million under the Sprint Financing Agreements. The Special Committee has not made any determination with respect to any future draws under the Sprint Financing Agreements.
Summary of Sprint Response to DISH Proposal
In response to the DISH Proposal, Clearwire has received a letter from Sprint stating, among other things, that Sprint has reviewed the DISH Proposal and believes that it is illusory, inferior to the Sprint transaction and not viable because it cannot be implemented in light of Clearwire’s current legal and contractual obligations. Sprint has stated that the Sprint Agreement would prohibit Clearwire from entering into agreements for much of the DISH Proposal. The following is a summary of Sprint’s statements in its letter regarding the material terms of the DISH Proposal:
Spectrum Purchase. Sprint has stated that, under the Sprint Agreement, Clearwire is prohibited from selling the Spectrum Assets without Sprint’s consent. In addition, Sprint has stated that Clearwire is further subject to various requirements under its commercial agreements with Sprint and the Equityholders’ Agreement applicable to selling Spectrum Assets, even if the Merger Agreement were not in place.
Commercial Agreement. Sprint has stated that, under the Merger Agreement, Clearwire is prohibited from entering into the commercial agreement proposed by DISH so long as the Merger Agreement is in place.
Acquisition of Clearwire Shares. Sprint has stated that the DISH Proposal may constitute a change of control under the Equityholders’ Agreement, which would require the affirmative vote of 75% of the issued and outstanding shares of Clearwire’s stock. Sprint has stated it would not vote in favor of the proposed transaction with DISH.
Governance. Sprint has stated that (i) it would be impermissible under Clearwire’s current Equityholders’ Agreement for Clearwire to agree to nominate DISH’s designees to the Clearwire Board, (ii) it would be impermissible under the Equityholders’ Agreement for Clearwire to create a new independent committee of the Clearwire Board and (iii) under Delaware law, certain governance rights requested by DISH (including the request for proportionate board representation) cannot be granted by Clearwire in a manner that does not require amendment of the certificate of incorporation or consent of Sprint to a shareholder agreement embodying what DISH has requested.
Funding. Among other arguments, Sprint has stated that the complex financing provisions of the DISH Proposal must also be considered in light of the existing Clearwire contractual arrangements (including debt arrangements) and that it is not clear from Sprint’s review that such financing is permitted by or would comply with Clearwire’s existing arrangements. In addition, Sprint has stated that Sprint and the other parties to the Equityholders’ Agreement would have preemptive rights with respect to any issuance of exchangeable notes by Clearwire as contemplated by the DISH Proposal, and any issuance of such notes may also require Clearwire stockholder approval in accordance with the NASDAQ listing requirements.
Sprint Financing. Sprint has stated that it is concerned with Clearwire’s failure to consummate the January 2 tranche of funding under the Sprint Financing Agreements, that it does not believe Clearwire’s initial draw notice was revocable and that it has reserved its rights relating thereto.
The Special Committee will, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, continue to evaluate the DISH Proposal and the letter from Sprint and discuss them with each of DISH and Sprint, as appropriate. The Special Committee and Clearwire will pursue the course of action that is in the best interests of Clearwire’s non-Sprint Class A stockholders. Neither Clearwire nor the Special Committee has any further comment on this matter at this time.
Evercore Partners is acting as financial advisor and Kirkland & Ellis LLP is acting as counsel to Clearwire. Centerview Partners is acting as financial advisor and Simpson Thacher & Bartlett LLP and Richards, Layton & Finger, P.A. are acting as counsel to Clearwire’s special committee.
Okay, now let’s see who’s got the bigger set of dishes!