The Clearwire Bidding War Erupts

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The DISH Network (NASDAQ: DISH  ) , Clearwire (UNKNOWN: CLWR.DL  ) , Sprint (NYSE: S  ) , 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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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 01, 2013, at 5:43 AM, EnergyRC10 wrote:

    Dear, there is an error in the article:

    "Clearwire's stock currently trades a few cents under DISH's bid"

    This is inaccurate, as Dish's bid is 4.40 and CLWR closed Friday night at 4.48, which is 8 cents above Dish's bid

    That being said, I have lost all respect for Clwr management & BoD, they have become nothing but puppets of Hesse & Son, acting only in their own best interest, which is being paid out a big cash bonus if they close the transaction with Sprint instead of anyone else.

    It is truly disgusting behaviour. They were touting Sprint's old bid of 2.97 as their only option and minority shareholders were told to swallow that deal and there were no other options, and look where CLWR is trading now... 4.48.

    They need to terminate the Sprint agreement, and start an open and fair bidding process for CLWR, which will unlock the true value of CLWR.

    Mr Stanton & Mr McCaw, you are the biggest disappointment of all.

  • Report this Comment On June 01, 2013, at 8:21 AM, nivegulu wrote:

    It's still far from fair value ~$12 pps.

    New Study Says Sprint Bid Vastly Undervalues Clearwire

    Tue Mar 12, 2013 12:32pm EDT 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:

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