How High Can Clearwire Stock Rise?

Last week, what Clearwire (UNKNOWN: CLWR.DL  ) thought was Sprint Nextel's (NYSE: S  ) best and final offer of $2.97 a share has been raised to Sprint's explicitly stated best and final offer of $3.40 a share. That's it, folks ... take it or leave it.

Leave it, says Crest Financial. Crest is Clearwire's largest non-Sprint shareholder with over 8% of Clearwire's shares. Crest said that the other minority shareholders should walk away from Sprint's increased offer because it "still significantly undervalues Clearwire."

But will DISH Network's (NASDAQ: DISH  ) counteroffer for Clearwire of $4.40 a share, a 29% premium over Sprint's "best and final offer," be enough to satisfy Crest and the other minority shareholders?

The answer is a definite "maybe, maybe not" from Crest.

In a letter to Clearwire's chairman, "Crest Financial Limited urges the Clearwire Board of Directors to consider genuinely DISH Network Corporation's tender offer for all outstanding shares of Clearwire Corporation for $4.40 per share. The Board has an obligation to consider DISH's offer and, in light of the offer, to recommend that stockholders vote against Sprint Nextel Corporation's offer."

But what Crest really wants is for Clearwire to be unencumbered by majority owner Sprint so that Clearwire can stand on its own, and let its shareholders reap the true value of Clearwire's large spectrum holdings.

"Once released from the ill-advised merger agreement with Sprint," Crest writes, "you will be able to begin an open and competitive bidding process for the Company that will include DISH as well as any other competing bids ... [T]he battle for Clearwire and its valuable spectrum assets is just beginning."

The postponed-once-before special meeting at which Clearwire shareholders were to vote on Sprint's $3.40 a share offer has been rescheduled for Friday, May 31, 2013.

But DISH's $4.40 a share bid has Clearwire once again postponing the vote to give it time to review this new offer.

This bid from DISH looks like it has more of a chance with the Clearwire board than the one it tendered last January. That offer was for $3.30 a share, but had too many contingencies for Clearwire to give it serious consideration.

DISH's new bid, however, has fired up their interest. "The Special Committee [to review the DISH offer] noted that while the most recent DISH proposal raises issues that need to be discussed with DISH, the proposal appears to be more actionable than DISH's previous proposal," the company announced on Thursday, May 30.

The new date for the special shareholders' meeting is set for June 13, a date that is significant for minority stockholders because it comes the day after Sprint shareholders are scheduled to vote on SoftBank's proposed merger deal.

Crest has been calling for the Clearwire vote to come after the Sprint-SoftBank vote because, if the merger is turned down, it could mean that SoftBank might then enter a bidding war for Clearwire.

Crest wrote in its proxy statement, filed with the SEC, that "both DISH and SoftBank suggested in public statements that ownership of Clearwire is among the primary reasons for their desire to acquire control of Sprint."

DISH is competing with SoftBank for Sprint.

"Of course, although superior to Sprint's current offer, DISH's offer may turn out still to be inadequate for Clearwire's stockholders," Crest wrote in its letter to Clearwire. "As we have said repeatedly, the battle for Clearwire is just beginning."

Remember, less than a year ago, Clearwire had been selling for under $1.00 a share. The market price today is up over 450%

Will Sprint raise its bid once more, or will DISH win out? This story is not over yet.


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  • Report this Comment On June 01, 2013, at 8:25 AM, nivegulu wrote:

    It's still far from fair value ~$12 pps. http://www.reuters.com/article/2013/03/12/crest-clearwire-st...

    New Study Says Sprint Bid Vastly Undervalues Clearwire

    Tue Mar 12, 2013 12:32pm EDT

    http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e3754... WASHINGTON, March 12, 2013 /PRNewswire-USNewswire/ -- A new study by former FCC commissioner Dr. Harold Furchtgott-Roth and the Analysis Group asserts that the price Sprint has offered for Clearwire Corporation significantly understates the true value of Clearwire's technology opportunities and wireless spectrum holdings. The study supports Crest's contention that the public would be best served if Clearwire remained free to offer its spectrum to multiple wireless carriers. The study was submitted to the Federal Communications Commission today by Crest Financial Limited, a major minority shareholder in Clearwire, in connection with the FCC's review of Sprint's proposed acquisition of Clearwire. According to the Furchtgott-Roth Report, Sprint's $2.97 per share offer for Clearwire represents a value of just $0.11 per MHz pop for Clearwire's spectrum and significantly understates the current value of Clearwire's unique spectrum holdings. The Report says that applying reasonable assumptions to the multi-customer business plan presented by two firms advising the Clearwire board results in a valuation between $9.54 and $15.50 per share. These share price values correspond to spectrum prices between $0.31 and $0.50 per MHz pop. The Sprint offer also fails to account for Clearwire's unique ability to deploy wireless technology that offers far greater future value than the technology currently offered by most major U.S. carriers, the study says. In his report, Dr. Furchtgott-Roth explains that TDD-LTE technology allows for higher download speeds and efficient spectrum utilization. He also notes that "the only band of spectrum in the United States that can be developed for TDD-LTE services is the 2.5 GHz band largely controlled by Clearwire." The Report, which was commissioned by Crest, explains that Sprint's offer ignores both the value ascribed to similar spectrum in recent transactions and the fact that Clearwire's spectrum holdings, together with its technology offerings, are well-suited for use by multiple carriers. "The fragmented spectrum holdings of other U.S. carriers create an opportunity for Clearwire to offer a valuable wholesale service," the report states. The Report supports Crest's argument made in filings with the FCC that Sprint's acquisition of Clearwire would harm not only Clearwire shareholders but also the public at large. Furthermore, the Report says that for unexplained reasons Clearwire abandoned the lucrative multi-customer strategy in favor of the Sprint acquisition. The Report supports Crest's position that the public would be best served if Clearwire could offer its spectrum to multiple customers, thereby allowing more wireless carriers to pursue new technologies and mount challenges to the wireless market's current duopoly. Dr. Furchtgott-Roth was an FCC commissioner from 1997 through 2001. Before that, he was chief economist for the House Committee on Commerce and a principal staff member on the Telecommunications Act of 1996. The Furchtgott-Roth study echoes a separate study, also done for Crest, by Information Age Economics (IAE), which says that the true value of the wireless spectrum owned by Clearwire is two or three times higher than the value reflected in the price Sprint has offered to pay to acquire Clearwire. The Furchtgott-Roth Report can be found here: www.bancroftpllc.com/crest.

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