Softbank, Sprint, Clearwire, Dish: Figuring out this merger mess
When two companies bid for each other's services and portfolios, things can quickly become confusing. When you double that figure, with four companies bidding for each other, and add a domino-like effect of parent companies and subsidiaries, things get even messier.
No more so than the Softbank—Sprint—Clearwire—Dish set of multiple mergers.
Here's what we know, from start to finish.
Japan-based telecoms giant Softbank made a bid to acquire a 70 percent stake in Sprint, the U.S.' third-largest cellular giant, last October.
Softbank offered $20.1 billion for Sprint, with an eye to close the deal by mid-2013. Sprint would be given $8 billion of new capital for investment back into its own cellular network — effectively to strengthen it and bolster its 4G LTE services.
With that cash injection, Sprint said it wanted to acquire the remaining 49 percent of shares in Clearwire, the seventh largest cellular network in the U.S. This would help Sprint acquire more wireless spectrum and boost its overall customer base. Sprint had suffered a massive dip in customers during recent quarters and would help its overall recovery.
Sprint's bid for Clearwire would amount around $2.1 billion in total, or $2.90 per share — around one-quarter of the cash injection given by Softbank to Sprint in its own deal — effectively buying out the company.
Clearwire wasn't happy with the $2.1 billion bid, despite Sprint offering a higher price to Clearwire's then market closing price. Sprint would therefore have to ask its now pending majority shareholder Softbank to approve any takeover of Clearwire.
However, things begin to get complicated when Softbank, which now by this point has a 70 percent ownership of Sprint pending, capped the Clearwire bid at $2.97 per share.
It became a game of buy-out chicken: who would budge, if anyone?
Seeing problems emerging, Dish Network came along, garnering enough confidence in the already complicated mess of buy-outs, to offer a far higher bid for Clearwire for $3.30 per share, or $5.15 billion — completely trumping Sprint's bid.
The Dish—Clearwire bid was unsolicited and unexpected, and despite the fact that Clearwire wasn't fielding offers from other companies. Clearwire said in a statement, knowing full well that 51 percent of its shares were already owned by Sprint, that while it would consider Dish's bid, it was "severely limited by its current contractual arrangements" with Sprint.
And Sprint wanted Clearwire badly, and likely wasn't going to allow Dish muscle in and take what it wanted. After all, for Sprint, gaining spectrum and a boost in customer numbers was far more important than any further cash injection it could receive from Dish's offer.
The Softbank—Sprint deal would still have to be approved by the U.S. Federal Communications Commission (FCC), however. Knowing this, Dish asked the FCC if it would hold off its review of the Sprint—Softbank deal, which would kill any chance of Sprint receiving the much-needed $8 billion in capital to buy Clearwire. This would give Dish enough room and space to buy Clearwire, and Sprint could do nothing about it.
Because Dish offered a much higher bid, Clearwire investors began to smell the money. They asked Sprint to up its offer, seemingly offering their preference to Sprint over Dish, despite the $2.97 per share cap imposed by Softbank.
And then it went suddenly very quiet, and the focus of things moving forward rested mostly on U.S. regulators.
For one, one of the conditions for the FCC approving the Softbank—Sprint deal would be that no networking gear from Chinese suppliers Huawei and ZTE would be used in any new or existing infrastructure. This follows criticisms from the U.S. House Intelligence Committee last year that said the two firms threatened U.S. national security due to alleged backdoors in their technologies.
Both Huawei and ZTE deny the allegations that they were or are under the thumb of the Chinese government.
Wanting an easy ride, Sprint and Softbank both agreed not use to such gear in their networks, thus appeasing the regulators and seemingly making one potential problem suddenly melt away.
Six months after the Softbank—Sprint deal was first announced, Dish submitted its own merger proposal to acquire — not Clearwire this time — but Sprint, which still owns 51 percent of Clearwire. Dish offered $25.5 billion for the third-largest U.S. cellular network, trumping Softbank's bid by a good couple of billion dollars, which would also include the more-than-half ownership in shares of Clearwire.
The deal would consist of $17.3 billion in cash and $8.2 billion in stock, with Sprint shareholders receiving around $7 per share. In total, it's a 13 percent premium to the value of Softbank's proposal to buy 70 percent of Sprint.
Dish has not withdrawn its offer for Clearwire, according to Reuters, but would instead honor the terms of an agreement should it be successful in its Sprint bid.
Satellite pay-television provider Dish wants Sprint to bolster its own services. By combining television with cellular and broadband services, "we will be the only company able to offer a fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services to meet rapidly evolving customer preferences," the company said in a letter to Sprint's board of directors.
In one fell swoop, Dish could buy not only Sprint but also half of Clearwire, which is what it wanted in the first place.
But just to make matters even more confusing than they already are, Verizon has reportedly offered to pay $1.5 billion to buy spectrum leases from Clearwire, according to The Wall Street Journal, as the land grab for wireless spectrum becomes increasingly desperate. It remains unclear if Verizon has any interest in acquiring half or all of Clearwire, however.
What next?
All eyes are now on whether or not Sprint ditches Softbank and accepts Dish's offer or not. For Dish, it not only gains one cellular network, but two. It also offers a home combination package of services to each and every home within its catchment area, and can offer enough cash to allow Sprint to invest back into its own network and boost its 4G LTE services.
And in the eyes of the FCC, it keeps U.S. jobs and U.S. business well and truly in the hands of a U.S. company.
It now all rests on Sprint. Who does it want to be owned by: Softbank, or Dish? Only it can decide, but it may face backlash from its own shareholders — and Clearwire shareholders, for that matter.