It’s officially tentative now: Clearwire (NASDAQ:CLWR, news, filings) has agreed to be acquired by its majority holder Sprint Nextel (NYSE:S, news, filings) for $2.97/share for the half Sprint doesn’t already own. Official because they’ve entered into a definitive agreement, and tentative because it won’t close until after the Softbank transaction does and is probably going to face some minority shareholder challenges in the meantime.
The payout would amount to about $2.2B to Clearwire’s other shareholders, and equates to an enterprise value of $10B given the net debt to be assumed and presumably refinanced. That’s up from the $2.90 bid we heard about last week, but it’s lower than the stock is currently trading at, as it finished up last week at $3.37 clearly on speculation that Sprint would (or will) be forced to pay more to get its hands on all that 2.5Ghz spectrum. I doubt we have heard the last of this.
It’s always a bit messy when a majority shareholder negotiates with its subsidiary for a price, but in this case the minority shareholders included Comcast, Intel, and Bright House Networks – not exactly easy names to push around. But each is probably just happy to end its unsuccessful foray into WiMAX at this point. Each has committed to voting for the deal, and they hold a combined 13% of the voting shares.
Sprint has also agreed to provide Clearwire with up to $80M/month in financing for up to 10 months in the form of notes exchangeable for stock at $1.50/share. That will let Clearwire get on with its LTE buildout, presumably, thus complementing Sprint’s own efforts and converging on a common effort when the deal finally closes.
Clearwire has been one of the more interesting stories of the past five years, challenging the status quo by building a brand new 4G network from scratch. They built it, but it just cost too much along the way and the money didn’t hold out. Their spectrum holdings are a major prize though, which is why Sprint is willing to spend billions to acquire a business with Clearwire’s huge debt, limited revenue, and impressively fiery cash burn.
But they couldn’t and wouldn’t do it without Softbank’s investment, taking a 70% stake in Sprint. Softbank is assembling what it hopes to be a strong third pillar of American wireless a few years down the road.