Shares of broadband wireless provider Clearwire (CLWR), which is the subject of a bidding war between Sprint-Nextel (S) and Dish Network (DISH), are down 2 cents, or 0.6%, at $3.17 after D.A. Davidson’s Donna Jaegers this morning cut her rating on the shares to Underperform from Neutral, with a $2.97 price target, the same as Sprint’s bid for the shares.
Jaegers thinks Sprint will be successful in blocking Dish’s competing $3.30 bid, despite potential objections to Sprint by Clearwire minority shareholders:
CLWR has been talking with DISH since mid-2011. DISH has offered $3.30 per share in a preliminary proposal that is contingent on the ability to buy some of CLWR�s more valuable spectrum, and Sprint�s approval on that sale as well as adding DISH board members. However, DISH�s offer does not provide for all of the longer-term funding CLWR will need (~$2 billion) and the proceeds from the $2.2 billion spectrum sale would be taxable, yielding net proceeds of $1.7-$2.1 billion. CLWR postponed drawing on the $80 million per month financing from Sprint so that it can continue to negotiate with DISH, and has a new deadline of Feb. 28th for its decision to draw on the Sprint funding. Can minority shareholders block this transaction? Sprint still needs 75% approval and to date seems to have secured ~64% of voting stock. CLWR�s minority shareholders may be able to block the S-CLWR transaction, but only until the Sprint�s standstill agreement ends on November 28, 1013. After that date, Sprint would only need 66 2/3% vote to change CLWR�s bylaws, and could probably accumulate additional stock in the open market, as well as change CLWR�s by-laws so that it did not need 75% approval for a change of control.
Jaegers’s note is somewhat in contrast to one on Friday from BTIG‘s Walter Piecyk, who argued that Clearwire having declined to take a first payment of $80 million from Sprint perhaps suggests Dish’s offer “is not so illusory after all.”
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