Sprint Flings Dish Into Court Over Clearwire Bid

Overland Park, Kan. — Sprint filed a lawsuit in a Delaware court to block Dish Network’s bid for Clearwire and effectively called Dish dishonest.
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Overland Park, Kan. — Sprint filed a lawsuit in a Delaware court to block Dish Network’s bid for Clearwire and effectively called Dish dishonest.

The suit against Dish and Clearwire follows a decision last week by Clearwire’s board to recommend that Clearwire shareholders vote down Sprint’s plan to acquire Clearwire and opt instead for Dish’s competing bid.

Sprint, which owns slightly more than 50 percent of Clearwire, wants to acquire the remainder of the Clearwire stock that it doesn’t already own.

Sprint is also asking the court for declaratory, injunctive, compensatory and other relief.

In its complaint, Sprint contended Dish’s tender offer violates the rights of Sprint and other Clearwire stockholders under Clearwire’s governance structure and under laws of Delaware, where Clearwire is incorporated. The suit also charged that “Dish has repeatedly attempted to fool Clearwire’s shareholders into believing its proposal was actionable in an effort to acquire Clearwire’s spectrum and to obstruct Sprint’s transaction with Clearwire.”

Sprint said Dish’s bid is “not actionable” because Clearwire conditioned its bid on obtaining governance rights that Sprint said can’t be handed over because of Clearwire’s governance structure and because of Delaware law. The governance structure was put in place in an equity holders’ agreement in 2008 when Clearwire restructured, Sprint said.

Specifically, Sprint said several rights demanded by Dish, including a contractual agreement to designate at least three Clearwire board members and the right to veto certain Clearwire actions, violate the equity holders’ agreement or Delaware law.

 Sprint also said that under Clearwire’s charter and the equity holders’ agreement, the Dish offer cannot be completed without the approval of holders of at least 75 percent of Clearwire’s outstanding voting securities, nor without the approval of Comcast, also an equity holder. Neither approval has been obtained, Sprint contended.

Dish’s offer, if completed, would also violate Delaware corporate law and Sprint’s and other strategic investors’ rights because it would vest Dish with “a veto power over fundamental corporate events that Delaware law places in the control of the directors or shareholders,” Sprint said.

Dish also cannot require Clearwire to place and maintain a number of Dish-designated board members because it would breach an equity holders’ agreement that stipulates Sprint can nominate seven directors, another investors group can nominate several other directors, and the nominating committee can nominate the remainder.

The Dish offer, Sprint continued, “is unlawfully coercive because it threatens to leave non-tendering shareholders holding shares in a company subject to governance deadlocks or substantial damage awards to Dish if Clearwire is unable to deliver on the unenforceable promises set forth” in Dish’s requirements.

 Because of Sprint’s ownership of more than 50 percent of Clearwire stock, Dish’s bid would give the satellite broadcaster only a minority share of Clearwire. Dish is seeking a minimum of 25 percent of Clearwire, governance rights and some board seats.

Dish is seeking access to Clearwire’s spectrum and expertise in helping it build its own wireless voice and data network to diversify beyond the mature satellite-TV business. Dish is also competing with Japanese carrier SoftBank to buy Sprint outright.

Sprint, though it owns almost 51 percent of Clearwire, doesn’t control the Clearwire board and wants full control of the cash-strapped money-losing carrier so it can use Clearwire’s spectrum to expand the capacity of its LTE network.

Sprint’s complaint can be found at copy of the complaint can be found at: BusinessWire.com/Multimedia/Home/20130617006681/en/.

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