Updated from 1:37 p.m. ET to include Paulson & Co. comments and closing share prices.
NEW YORK ( TheStreet) - Large hedge fund investors are poised to play a big role in whether Dish Network (DISH) will succeed in its $25.5 billion proposal to buy telecom Sprint (S), as the satellite TV giant tries to enter the wireless business.
Dish is offering $7 a share for Sprint, $4.76 in cash and about $2.24 in Dish stock, in a bid it says is superior to an October offer from Softbank of Japan. Masayoshi Son-run Softbank offered to make an $8 billion equity capital infusion into Sprint at $5.25 a share -- and a tender offer for 70% of company's existing shares at $7.30 - in a move it said would revitalize the carrier's finances.
With competing proposals for Sprint now on the table, vocal hedge funds may ultimately play a big role in deciding whether Dish Network or Softbank will win in efforts to take on AT&T (T) and Verizon (VZ) in the wireless market.For instance, Paulson & Co. an active shareholder in T-Mobile's merger efforts with MetroPCS (PCS), is also a top Sprint shareholder. Given Paulson's opposition to the T-Mobile transaction until an amended merger offer lowered overall debt levels of the merged entity, the hedge fund could similarly be an arbiter of Dish's proposal, announced on Monday. Dish Network said on a Monday investor call the combined company would hold debt levels in excess of 4.7 times earnings before, interest, taxes, depreciation and amortization, which would climb over time before falling as a result of synergies. In opposing T-Mobile's first offer for MetroPCS, Paulson & Co. balked at debt levels of 3.6 times EBITDA. According to the fund's own analysis from February, it projects Sprint and Softbank to hold debt levels of just 1.5 times EBITDA, in-line with AT&T and Verizon. Paulson & Co. is an 4.24% Sprint shareholder with a stake worth about $800 million prior to Monday, according to year-end Securities and Exchange Commission filings. "Paulson is a large shareholder in Sprint. We think Dish has made a compelling offer and we will be watching closely how things transpire," a spokesperson said on behalf of Paulson & Co. Sprint was the fund's biggest new position in the fourth quarter, as the fund acquired 127.7 million shares, according to a February filing. Meanwhile, other large Sprint shareholders also have big positions in Dish Network shares, betting the company's chairman, Charlie Ergen, will play a hand of wireless assets flawlessly. Omega Advisors, run by Leon Cooperman, counts Sprint as the hedge fund's largest stock position with a holding of 1.86% of the company's outstanding shares, according to SEC filings. The fund, however, also is a near 2% shareholder in Dish Network, with shares worth about $130 million, prior to Monday trading. In a brief phone interview with TheStreet, Cooperman wouldn't say whether he believes Dish Network or Softbank's proposal for Sprint is a superior offer, however, he did say the competing offers may make for a bidding war. "We think Charlie Ergen is brilliant and we think
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