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A Crucial Date Ahead for Sprint, DISH, and Clearwire

By Michael Lewis – May 1, 2013 at 10:00PM

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The M&A battleground continues to heat up as offers fly left and right. May 21st will be the first official day of reckoning. Investors in any of the three need to stay informed.

As the battle between DISH Network (DISH 0.93%), SoftBank, and Sprint (S) continues to generate controversy, an important date approaches for investors in all three companies. On May 21, Clearwire (NASDAQ: CLWR) shareholders vote on approving Sprint's acquisition offer. The deal has received a large amount of criticism for undervaluing Clearwire shares, and also comes in conflict with DISH's offer. Adding more confusion, DISH also has an outstanding offer for Sprint, in which it would then extend Sprint's offer to Clearwire shareholders. If it sounds like a mess, that's because it is. Here's what investors need to know over the next three weeks.

There doesn't seem to be any clear-cut solution to what's going on among the companies involved. Sprint is the majority owner of Clearwire -- a beleaguered telecom with very valuable spectrum assets. Clearwire uses Sprint financing to keep its business upright while it tries to get back on its feet.

Sprint has an outstanding offer of $2.97 per share for the remainder of Clearwire. Crest Financial, a 5% owner of Clearwire, is suing, and has asked the FCC to block the deal because it believes it undervalues shares, especially in light of the fact that DISH has offered $3.30 per share for Clearwire, as well. As of the latest update from Clearwire's board members, the company's management remains behind Sprint as the suitor of choice. The former has tapped an additional $80 million in financing from Sprint as part of an overall $800 million financing.

DISH has another offer on the table -- for Sprint. The company has offered $25.5 billion for Sprint, which would create a juggernaut of a telecom with nearly unmatched ability to offer a full package of media and telecom services. It would also create an Everest of debt -- a frightening scenario for shareholders. The deal comes in direct conflict with Softbank's outstanding bid for Sprint in the amount of $20.1 billion. Softbank gave permission to Sprint to form a special committee to take into consideration DISH's offer.

Clearly, there's a lot going on here. The winner? So far, a mix of law firms and investment banks. But what happens on May 21?

May 21
As noted in The Wall Street Journal, Sprint doesn't need much to win approval for the acquisition. Sprint already has the consent of 13% of Clearwire's outstanding shares. The remaining 37% that's not already owned or controlled by Sprint, is the crucial voting body, of which only 12% is required to vote in favor of the deal for it to go through.

There's strong sentiment from Crest Financial and others against the deal, and it does have the capacity to prevent the deal. In that case, DISH could potentially swoop in and take Clearwire, and thus encourage a DISH-Sprint merger; or they could initiate a bidding war, which would appease Clearwire's activists, and likely sell the company to Sprint, leaving DISH to fight for Sprint or go home.

Investors in all three companies should keep an eye on the May 21 proceedings. On one end, Sprint and Softbank are the winners. On the other, you'll likely see a boost to Clearwire and DISH Network. For both ends, it will be the first major decision point for the battle that began nearly six months ago.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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