Clearwire(s clwr) is making its case to its shareholders to approve Sprint’s(s s) $2.2 billion offer to gobble up the remaining half of the company Sprint doesn’t already own. In a letter to shareholders sent Monday, the Clearwire board said that the Sprint buyout represented the best strategic option for shareholders and painted a bleak picture of Clearwire’s future if it pursued other deals.
Dish Network(s dish) in January submitted an unsolicited counterbid for Clearwire offering an 11 percent premium over Sprint’s $2.97-a-share offer, but Clearwire made no reference to Dish’s proposal. Clearwire said it investigated several other possibilities, including proceeding as an independent mobile broadband carrier, which is what the Dish deal would entail. But Clearwire management claimed that those alternatives were either infeasible are or wouldn’t dig Clearwire out of its current financial hole.
Clearwire tried to sell part of its treasure trove of airwaves back in 2010 and again in 2012, but it couldn’t close a deal despite consulting with 37 prospective buyers, the letter said. The letter said Clearwire also looked into additional debt and equity financing option and even investigated a financial restructuring through Chapter 11 bankruptcy, but neither assured the company’s survival, nor offered much value to shareholders.
In order to survive independently Clearwire needs another major wholesale broadband access customer besides Sprint, the letter said, but the obvious candidates – the major mobile operators – aren’t interested. They prefer to own their spectrum and build their own network rather than lease Clearwire’s capacity. Given that situation, the Clearwire board concluded Sprint would remain Clearwire’s primary customer for the foreseeable future, so becoming fully owned and controlled by Sprint made the most sense.
Last week, a group of Clearwire shareholders went into revolt, telling the SEC they wanted either Sprint to make a better offer or force Clearwire to consider Dish’s offer. Meanwhile Dish is playing both sides of the transaction. Not only has it submitted its bid for Dish, it is challenging Sprint’s own buyout offer from SoftBank with a $25.5 billion counterbid.