December 13, 2012 3:47 pm

Clearwire investors object to Sprint offer

Clearwire minority shareholders are objecting to the price Sprint Nextel is offering to buy them out, potentially complicating Sprint’s move to take full control of the company’s valuable spectrum.

On Thursday, Sprint Nextel revealed plans to acquire shares of Clearwire that it does not already own for $2.90 per share, or a total of $2.1bn.

Sprint raised its stake in Clearwire to 50.8 per cent in October, but it still needs to acquire the rest of Clearwire’s shares to gain full control of the spectrum it covets, which is overseen by a special committee at Clearwire.

If successful, the offer would resolve ambiguities about the sometimes fractious relationship between Sprint Nextel, the third-largest US wireless operator, and Clearwire.

But even before Sprint’s formal offer was on the table, shareholders were objecting to the price, which was leaked this week.

“We believe it might take much more than $3 per share for Sprint to take control of Clearwire,” said BTIG analyst Walter Piecyk in a note.

Mount Kellett Capital Management, which owns 6.75 per cent of outstanding shares, has said Clearwire shares are worth as much as $8 each. Other major shareholders said $3 was far too low, and suggested that a price of $6 was more reasonable.

Much will depend on whether Comcast and Intel, which each own substantial stakes in Clearwire, are willing to sell their shares to Sprint. Neither company has given any indication of how much they are willing to sell for.

Sprint may go ahead with a deal even at a higher price, analysts say. “It will be well worth the price in order to secure all of Clearwire’s spectrum for its own use, keep it out of the hands of competitors and eliminate material roaming expense,” Mr Piecyk said.

The move comes just six weeks after Japan’s SoftBank announced plans to acquire a 70 per cent stake in Sprint Nextel as part of a strategy aimed at turning Sprint Nextel into a stronger rival to Verizon Wireless and AT&T Mobility, the two largest US mobile operators.

The planned SoftBank transaction and a related convertible bond sale completed last month would provide Sprint Nextel with the funds it needs to acquire additional wireless spectrum and play a larger role in the continuing consolidation of the US mobile phone market.

Sprint said on Thursday that it planned to fund the purchase from its working capital and has proposed to provide interim financing of up to $800m to Clearwire.

Clearwire confirmed that it was in talks with Sprint regarding a potential strategic transaction. A special committee of the Clearwire Board of Directors has been reviewing the offer contained in a proposal tabled by Sprint on Wednesday.

“There can be no assurance as to the terms of any potential transaction or that any transaction will result,” Clearwire said.

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