Sprint Sues Dish Seeking to Block Clearwire Buyout

sprint nextel lawsuit dish network clearwire acquisition softbank
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By Jonathan Stempel and Sruthi Ramakrishnan

Sprint said it has sued Dish Network to block its tender offer for Clearwire, on the eve of a key deadline in a takeover battle that also includes Japanese mobile carrier SoftBank.

The lawsuit filed Monday in Delaware Chancery Court accuses Dish Network (DISH) of trying to "fool" and "coerce" Clearwire (CLWR) shareholders into tendering their shares, and rejecting Sprint's competing effort to buy the 49.8 percent it didn't already own of the wireless broadband provider.

It came one day before a deadline for Dish to sweeten its earlier $25.5 billion bid to buy Sprint Nextel (S), which has endorsed a competing bid by SoftBank.

Sprint said Dish's offer would leave non-tendering shareholders owning stock in a company "handicapped by unlawful corporate governance restrictions, onerous debt provisions, and potentially ... subject to massive money damages claims payable to Dish -- an entity which has everything to gain from a failure of Clearwire."

The lawsuit also names Clearwire as a defendant.

Last week, Clearwire's board urged shareholders to accept the Dish tender offer, which values Clearwire at $4.40 a share. Sprint has offered $3.40 a share for the Clearwire stock it doesn't own.

Dish spokesman Bob Toevs said, "We are reviewing the complaint and considering our options."

Clearwire spokeswoman Susan Johnston said that company does not discuss pending litigation.

June 18 Deadline

The lawsuit adds a new complexity to a takeover battle in which SoftBank and Dish are bidding for Sprint, while Dish and Sprint are bidding for Clearwire.

Last week, SoftBank raised its offer for Sprint to $21.6 billion from $20.1 billion, which would give it a 78 percent stake in the Overland Park, Kan.-based company.

The new offer includes $16.6 billion of cash, and would be the largest overseas acquisition by a Japanese company.

Sprint then gave Dish, a satellite TV provider controlled by billionaire Charlie Ergen, until June 18 to sweeten the $25.5 billion bid, which it said isn't "actionable," and make its best and final offer.

Dish is based in Englewood, Colo., and Clearwire in Bellevue, Wash.

Wireless Moves

Known for pursuing fierce takeover battles, Ergen is interested in Clearwire to expand into wireless amid a maturing of Dish's traditional pay-TV business. Sprint, meanwhile, hopes to use Clearwire to help it better compete in mobile communications with larger rivals AT&T Inc. (T) and Verizon Wireless (VZ, VOD).

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SoftBank had approved the Sprint bid for Clearwire, but said it would be content even if shareholders rejected that bid because Sprint would still control a majority of the company. The Japanese company is controlled by billionaire founder Masayoshi Son, who is known as a risk-taker despite his country's normally cautious corporate culture.

Shareholders of Sprint are scheduled to vote on the $21.6 billion SoftBank offer on June 25.

Paulson & Co., the hedge fund run by billionaire John Paulson and Sprint's second-largest shareholder, has said it would vote for the SoftBank transaction.

The lawsuit was announced after U.S. markets closed. In Monday trading, Sprint shares closed down 10 cents at $7.22, while Clearwire shares were unchanged at $4.63.

The case is Sprint Nextel Corp. v. Dish Network Corp., Delaware Chancery Court.


Originally published