Clearwire Board Recommends Purchase By Sprint

Bellevue, Wash. – Clearwire’s board unanimously recommended that shareholders vote May 21 to approve Sprint’s proposal to acquire all of the Clearwire shares that Sprint doesn’t already own.
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Bellevue, Wash. – Clearwire’s board unanimously recommended that shareholders vote May 21 to approve Sprint’s proposal to acquire all of the Clearwire shares that Sprint doesn’t already own.

Sprint owns a majority of Clearwire shares but does not control the board.

 In a letter to shareholders, the board said it based its decision on a special committee’s “careful and rigorous review of all options available to Clearwire, with the assistance of independent financial and legal advisors.”

It’s not certain whether all Clearwire shareholders will listen, however. Shareholders representing 18 percent of Clearwire shares on Friday disclosed they want Sprint to make a better offer. Two other shareholders have filed suit to block the transaction.

  In making the recommendation to shareholders, the Clearwire board contended the company “is unlikely to have buyer interest for all 47 billion MHz-POPs of spectrum above the $0.21/MHz-POP value implied by Sprint proposal.” The board also said that “even a sale of a meaningful block of spectrum would leave Clearwire exposed to significant risks and would not solve Clearwire’s long-term liquidity challenges.” A partial sale of spectrum to raise money, the board continued, “does not address the fundamental need for significant additional revenues.” Such a sale as proposed by satellite-TV provider Dish “potentially reduces future demand for Clearwire’s network if sold to a potential wholesale customer,” the board added.

 Earlier this year, satellite-TV provider Dish proposed to purchase 25 percent of Clearwire’s spectrum to help build out a nationwide terrestrial wireless voice and data network and potentially buy up to 100 percent of Clearwire shares. Dish, however, subsequently put in a bid to purchase all of Sprint to compete with a bid by Japan’s Softbank to purchase Sprint. If Dish’s bid is successful, Dish would get all of Clearwire’s spectrum and assets, not just 25 percent of Clearwire’s spectrum.

 Clearwire’s board also contended that “a sale of the company to a third party other than Sprint is unlikely to occur due to Clearwire’s governance structure and Sprint’s unwillingness to sell its stake.”

 “The proposed transaction with Sprint provides a clear solution to the substantial funding gap Clearwire is facing,” the board stated. “The company’s prospects of securing the $2-$4 billion in additional funding necessary to continue operations and the LTE build plan are highly uncertain.”

Sprint’s bid for Clearwire’s shares is valued at $2.2 billion.

Clearwire disclosed in its third quarter 2012 filings that it had 12 months of liquidity remaining, and in its first quarter 2013 filing, Clearwire said that even if it curtailed or suspended its LTE buildout, its liquidity would be depleted in the first quarter of 2014 if it didn’t get additional financing. The company, however, concluded that “securing the additional financing to fund the standalone business plan would be challenging, expensive and highly dilutive to stockholders, if available at all.”

 It’s not certain whether all Clearwire shareholders will listen, however. Shareholders representing 18 percent of Clearwire shares on Friday disclosed they want Sprint to make a better offer. Two other shareholders have filed suit to block the transaction.

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