The Clearwire Bidding War Erupts


The DISH Network , Clearwire , Sprint , Softbank M&A extravaganza continues to become more confusing and fun to watch. As the CFIUS clears, the Japanese bank for its proposed acquisition of telecom Sprint, competing bidder DISH, which also has a bid for Clearwire, which is also being bid on by Sprint, has now refocused on its offer for Clearwire, raising it substantially above its competitor's offer. The news has various stock moving in various directions, with Clearwire shareholders the latest winners. If you are trying to play this acquisition merry-go-round, good luck because -- like this paragraph -- the story is all over the place.

Organizing thoughts
In case you haven't been watching this buyout dance, let's recap.

Sprint is a major holder of Clearwire. Clearwire has been a struggling operation for some time now, but it holds very valuable assets -- mainly spectrum. Clearwire uses Sprint financing to maintain operations while it is shopped around -- mainly to Sprint. Clearwire's board wants Sprint to take the prize, though shareholders have argued that the deal undervalues Clearwire shares. There have been proxy battles mounting for some time, led by Crest Financial.

DISH Network has been a busy little satellite provider, trying to build out its own broadband network. The company received approval from the FCC to launch a 4G network, but it needs more spectrum and/or a platform to launch its $4+ billion Herculean effort to enter the densely populated, fiercely competitive space. DISH has put in offers for Clearwire, as well as Sprint. As the Sprint deal looks less and less likely (despite a superior per-share bid than competitor Softbank), DISH management seems to have reversed course and refocused on the Clearwire deal, upping its bid to $4.40 per share. Sprint's current offer is more than a dollar under that bid, enraging and enticing Clearwire shareholders. A DISH buyout would really benefit all three parties, at least for now. Clearwire minority holders get their premium share price, DISH gets its spectrum, and Sprint, a majority holder of Clearwire equity, can bank a profit on the stock as well.

So what does it mean?
The Clearwire board has delayed the shareholder vote scheduled for today to June 13. This allows for a greater bidding war (a possible motive for Clearwire management), more CEO-to-CEO banter, and speculation from quick-trading investors. Clearwire's stock currently trades a few cents under DISH's bid, setting the risk level high in case the offer is rejected. DISH is trading down a bit, though still near its 52-week high, implying investor confidence. Sprint remains near its highs as well. The fact that both Softbank and DISH so dearly want to buy the telecom signals to investors and analysts that there is indeed value to be had in the once-troubled company.

In the meantime, investors trying to play the action should proceed very carefully. If there is one thing we've learned from this long-running battle, it's that we know absolutely nothing until something actually happens. And that is a terrible investment thesis.

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