Sprint cites Delaware state law to block Dish from Clearwire bid

Sprint cites Delaware state law to block Dish from Clearwire bid

Summary: Sprint is pulling all of its cards out to block any chance Dish might have in the Clearwire bidding drama.

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The battle for high speed Internet service provider Clearwire is getting even more tangled this week as Sprint is now pulling some new legal cards.

In an effort to block a bid by Dish Network, Sprint is arguing that satellite TV company's proposal violates Delaware state law.

Here's an excerpt from the memo sent to Clearwire's board of directors today:

Your May 30, 2013 release indicates that while the DISH proposal “raises issues”, it appears to be “more actionable” than prior proposals by DISH. DISH has conditioned its tender offer on the execution by Clearwire of an Investor Rights Agreement which would grant DISH specific governance rights. DISH proposes to receive these rights without stockholder approval, and to shift the significant risk that such rights are not enforceable to Clearwire and the non-tendering stockholders (including Sprint). To be clear, certain provisions of the DISH proposal require Sprint’s consent, and other provisions violate Delaware law, Clearwire’s certificate of incorporation, or the rights of the parties to the existing Equityholders’ Agreement (EHA). Sprint will not vote in favor of the proposal, tender its shares in the offer or waive any of its rights as a stockholder or under the EHA. Sprint will enforce its legal and contractual rights. Thus, the DISH proposal is not actionable.

To recall, Dish sent a new offer to Clearwire's board last week, offering $4.40 per share, valuing the firm at $6.5 billion.

More importantly, that is a 29 percent premium on Sprint's proposal of $3.40 per share.

To make this even more tangled, this follows up a $25.5 billion bid for Sprint Nextel back in April as well as a reported $2 billion bid for LightSquared's radio frequencies.

A full copy of the letter penned by Sprint's legal team is available online now.

Topics: Mobility, 4G, Government US, Legal, Tech Industry

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9 comments
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  • Does Sprint have a valid legal argument?

    Or are they just "huffing and puffing"?
    sismoc
    • Circling sprint like a vulture--- Before mandated divestitures

      They're huffing and puffing, while the other 5 carriers are trying to figure out what pieces of Sprint they want to ask the FCC for.

      You can't really load up on spectrum, have twice as much as Verizon or AT&T, and then find an offshore investor to buy the company without divestitures.

      DishNetwork, and likely others have likely approached Sprint for business deals prior to asking FCC and DoJ for divestitures.

      I'm getting some popcorn for this; Sprint always had an ego at the higher levels.
      donald duck 313
      • Sprint wont likely have to Divest.

        The EBS(leased) spectrum, which is what most of Clearwire's spectrum holdings are, does not count against Sprint's spectrum screen. In all markets their is a max 55.5Mhz of BRS(licensed) spectrum that can be attributed to Sprint's spectrum screen. Counting only the 55.5Mhz, Sprint would still technically have less spectrum than ATT or Verizon. Also Sprint cleared the ability to own said spectrum, when they originally got it from Nextel. The FCC will not count the EBS against them, because it actually benefits the leasee, which in this case are universities.

        Dish is not getting anything. The whole reason they threw out this offer, at the last minute, was to obstruct Sprint. They should be investigated. They had 5 months to negotiate a reasonable deal with Clearwire. In an SEC filing, Clearwire even mentioned that Dish stopped talks after making the Sprint offer.
        ChadBroChillz
    • Hard to say

      I suspect the only people who would know are lawyers licensed to practice in Delaware. I assume that Delaware law is an issue because that's where either Clearwire or Dish (if not both) are incorporated.
      John L. Ries
  • Dear Sprint, "NON-voting" can't vote.

    I hope Sprint realizes this is just sad. They are upset because they feel this sell could be risky and think that they should be allow to decide the fate of the company with their non-voting stock. An equity holder has no real voting rights. That is the deal they made for their shares, if they invent time travel I guess they could go back and redo their deal.
    alex_darkness
    • They can vote.

      Sprint currently owns 50.8% of the vote. They are the majority shareholder in Clearwire. Sprint along with other equity shareholders that support Sprint have 64% of the vote. Hesse was not dumb when he made this deal with Clearwire. He made sure Sprint was basically the only company Clearwire could be sold to and that any Spectrum sales would have to go through Sprint.
      ChadBroChillz
  • Get the popcorn...

    There is a reason why most large corporations base themselves in Delaware. This should be interesting to watch, lol! Sprint really wants Clearwire, especially after investing all of those billions in it, but can't say that out loud legally.
    Andylb
    • But it did?

      Hesse said multiple times in the letter that they invested billions of spectrum, technology and capital into Clearwire and they will fight for their bargained rights. He also mentions that under Delaware Law that Sprint is not obligated to forfeit those rights to benefit the minority shareholders. The Letter has a mix of Delaware state law and the rules in the Clearwire EHA to strike down Dish's bid.

      Putting Delaware law in the title has more of a pull to it than saying they used Clearwire's EHA against them.
      ChadBroChillz
  • This is going to get ugly

    I dont know why everyone is fighting over Clear and Sprint now.... Sprint is a major, it getting scooped up is a bad thing..
    Jimster480