U.S. third largest cellular network Sprint is offering $2.1 billion for the remaining shares it doesn't own in Clearwire.
In October, Sprint announced that it would sell a 70 percent stake in the company to Japan's Softbank for $20.1 billion. In return, Sprint will receive $8 billion of new capital for investment back into its mobile network.
Roughly, that equates to $2.90 a share for the remaining 48.3 percent of Clearwire that Sprint doesn't already own. The figure values Clearwire, a smaller U.S. network with around 11 million subscribers, at approximately $4.2 billion.
The proposed price is 5 percent higher than Clearwire's closing share price on Wednesday, but 20 percent higher than the closing price on Monday, when Sprint's plans to make a bid for Clearwire first leaked.
In an 8-K filing with the U.S. Securities and Exchange Commission (SEC), Clearwire said that Sprint had filed with the regulator its plans to acquire the remaining shares of the company that it does not yet already own.
Clearwire's filing said:
Clearwire is currently in discussions with Sprint regarding a potential strategic transaction. A Special Committee of the Clearwire Board of Directors, previously formed to review potential indications or proposals, including from Sprint, has been reviewing the potential strategic transaction. On December 12, 2012, Sprint submitted a non-binding proposal that had been reviewed by its Board of Directors, which included a purchase price for the remaining shares of Class A common stock and Class B common stock (and related Clearwire Communications LLC units) of Clearwire it does not already own.
But the deal won't go ahead unless Softbank, Sprint's majority owner, agrees the deal. Sprint's Schedule 13D report to the SEC stated that the Sprint-Clearwire acquisition would be contingent on the Sprint-Softbank deal going ahead first, or "consummated," as Sprint said.
Sprint's filing said:
Sprint anticipates that a definitive merger agreement entered into by Sprint and Clearwire in connection with the Proposed Transaction would contain, as a condition to consummating the Proposed Transaction, a requirement that the transactions contemplated by the SoftBank Merger Agreement (the "SoftBank Transaction") will have first been consummated.
But now it's all beginning to make sense.
Sprint already owns 51 percent of Clearwire, and now intends to own the rest. It probably shouldn't come as much of a surprise after the T-Mobile--MetroPCS deal earlier this year, which shook up the U.S. mobile industry and signaled a new competitive streak among the networks. The T-Mobile--MetroPCS deal is set to close by the second-quarter, says T-Mobile USA's parent company Deutsche Telekom.
The problem for Sprint will now be to bring Clearwire's debt and lack of profits onto its own books. The Sprint-Softbank deal will take care of most of that, but the whole domino-like effect of acquisitions rests ultimately in the hands of Softbank's shareholders.
Sprint was up slightly on Thursday before the markets opened, while Clearwire was up by more than 14 percent by early-morning pre-market trading.
Clearwire this morning on the Nasdaq (note the grey lines are pre-market trades):