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DISH Set to Win Clearwire Battle

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In the latest chapter of 2013's biggest M&A drama, it looks like DISH Network (NASDAQ: DISH  ) may now be the favored suitor for spectrum-rich Clearwire (UNKNOWN: CLWR.DL  ) , while Sprint (NYSE: S  ) may no longer be the target of choice for Japanese bank SoftBank. The news comes as a surprise to many, as Clearwire's board had long lent its support to Sprint as the appropriate buyer for the company, despite multiple increases in DISH's offer. As the final iteration of this buyout saga begins to take shape, here's what you need to know to make the right investment.

Let's get this straight, one more time
As of this week, the special committee that Clearwire formed to investigate strategic alternatives officially switched tunes, and sided with DISH Network's $4.40 per share tender offer.

This comes in the face of last week's noise from Sprint that alleged that DISH Network could not legally buy Clearwire, for a variety of reasons. DISH chairman Charlie Ergen responded quickly with a thorough explanation as to why those allegations were simply not true.

Though it isn't official until the papers are signed, it's looking a lot like DISH will end up as the victor, unless Sprint swoops in with a last second show stealer. For DISH investors, this is a big win, as the company has relentlessly been working toward leveraging its multi-billion dollar broadband network effort. Clearwire's assets give the satellite TV provider a big step forward in its quest.

On the other side of the game
Though Sprint may not get its way with Clearwire, the company continues to shop itself to the highest bidder. And, of course, DISH Network has an outstanding bid for Sprint, as well, though this one does not look nearly as likely to occur (and perhaps was used as negotiating leverage to begin with). Shareholder watchdog firm, Institutional Shareholder Services, in addition to Sprint's board, have officially gotten behind SoftBank as the best option for shareholder value. DISH's offer, though higher on a per-share basis, has been criticized as not creating ideal synergies and, perhaps, hurting shareholders in the long run.

The real nail in the coffin for a Sprint-DISH deal, in my opinion, was Sprint's demand that DISH pay a $3 billion termination fee in the event that the merger is blocked (via regulators). DISH had agreed to $1 billion, but was not willing to go over -- wisely.

Bottom line
As I mentioned, nothing is official until its official, but the smoke appears to be clearing. For prospective investors, look into DISH Network's plans for a broadband network. Though incredibly expensive and ambitious, the project puts the satellite TV provider on the same playing field as the major telecoms, and allows for substantial growth. The stock is currently not value priced, but could appeal to growth-hungry investors.

As for trying to play the M&A roulette trade, I would just say "don't."

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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 15, 2013, at 6:54 AM, nivegulu wrote:

    Even Dish's bid is too low.

    New Study Says Sprint Bid Vastly Undervalues 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.""

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Related Tickers

12/31/1969 7:00 PM
CLWR.DL $0.00 Down +0.00 +0.00%
Clearwire Corp CAPS Rating: **
DISH $54.78 Down -0.26 -0.47%
DISH Network CAPS Rating: **
S $6.63 Down -0.03 -0.45%
Sprint CAPS Rating: **