What's Next With This Intended Acquisition?

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Clearwire Corporation's (NASDAQ: CLWR) shares recorded an increase of 0.26% after the firm received a bid of $3.30 per share from DISH Network Corporation (NASDAQ: DISH). Clearwire is a wireless broadband service provider. The bid from Dish was received just a month after Sprint Nextel Corp.’s (NYSE: S) bid was accepted by Clearwire. Based on $2.97 per share, the bid from Sprint was for the remaining stock that has not been bought by Sprint, which already owns 50.8% of Clearwire’s shares. It can be recalled that Sprint is almost at the point of being acquired by Tokyo-based SoftBank Corporation, which is expending about $20 billion for 70% ownership of the company (Sprint).

Dish recently had its stock upgraded to a Buy rating by Wunderlich after its offer on Clearwire became public knowledge. Presently, some analysts are looking at Dish’ offer from different angles. For example, Sanford C. Bernstein & Co.’s Craig Moffett sums up his opinion in these words:

“It’s hard for me to imagine that what Dish wants is Clearwire. It could be a chess move to get a partnership with Sprint.”

Other analysts who have aired their views on this issue include Kevin Smithen of Macquarie Capital and Thomas Seitz of Jefferies. They are all of the opinion that Dish, through its offer of $3.30 per share, is only trying to cut a deal with Sprint. Prior to this, Sprint was already anticipated to be a potential 4G partner with Dish, long before it got itself entangled in the acquisition deal with SoftBank. Smithen is also of the opinion that, should Sprint increase its current bid of $2.97 per share to $3.50-$3.75 per share, Dish and other shareholders interested in acquiring Cleawire would have no option than to back down. This includes Crest Financial, which is strongly against Sprint's bid.

To Sprint, raising its bid beyond $2.97 is not feasible. In reacting to the offer from Dish, which the company says is not viable, Sprint has made it clear that it is not under any form of pressure to increase its $2.97 per share offer after the bid from Dish. According to Sprint, the offer it made Clearwire was “more financially sound” than the offer from Dish, which came with certain conditions. Now if you take into consideration what an analyst from Nomura Securities, Mike McCormack said about the offer from Dish, you would no doubt agree with Sprint. According to McCormack:

“For Sprint to match Dish's offer it would cost an incremental $239 million, consisting of $228 million to non-Sprint shareholders and $11 million to (Craig McCaw's) Eagle River. It will cost Sprint an incremental $72 million for every 10 cents above its original $2.97/per share bid. We expect the Clearwire board will have significant concerns regarding the Dish offer, making a deal difficult, in our view.”

Some analysts also believe that since SoftBank took the decision to invest in Sprint, shares of AT&T (NYSE: T) and Verizon (NYSE: VZ) have been weakened by the move. AT&T recently announced the sale of more than 10 million smartphones in Q4, which is higher than its sales of 9.4 million smartphones in Q4 of the previous year. It is surprising that even after this report, shares of this company remain in the negative. This announcement came in the wake of the company’s introduction of the U-verse Screen Pack, a $5 a month movie streaming service that is developed for its TV subs. Verizon, on its part, is looking forward to its report of 9.8 million smartphone activations for Q4, with Apple smartphones making up a higher percentage of the activations. In comparison to the previous year’s Q4 activation number of 7.7 million and Q3 activation of 6.8 million smartphones, it will be a 29% and 44% increase, respectively.

Although Clearwire will play a significant role in Sprint’s plan to implement its LTE technology, Sprint should not be surprised to see more companies making moves like that of Dish. This is especially true considering that Clearwire controls some portion of the broadband wireless spectrum that caters to the needs of consumers who are in daily demand of broadband services for photo sharing, video streaming, browsing the internet, etc. However, Sprint might not back down because getting its hands on those remaining shares is the only way it can gain total control over Clearwire’s assets. 


Chizy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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