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TheStreet Open House

TheDeal: Dish Don't Scare, Feds Say

Stocks in this article: S DISH

NEW YORK ( TheStreet) -- National security arguments by Dish Network (DISH - Get Report)to scare Sprint Nextel (S) shareholders away from Softbank Corp.'s rival offer aren't valid, say Washington attorneys monitoring the government's investigation of possible telecommunication acquisitions by foreign buyers.

Dish earlier this week, showed it's not about to pullback in its attempt to thwart a rival bid from Japan's Softbank to acquire control of Sprint. Responding to a Wall Street Journal report that Softbank is willing to let the federal government approve one of the directors it names to Sprint's board, Dish said the plan was inadequate to protect national security, an assertion that implies Softbank's proposed agreement will not be accepted by the government.

The government's board seat veto would be included in a mitigation agreement addressing security concerns raised by the Committee on Foreign Investment in the United States about Softbank's gaining control over Sprint. CFIUS is the Treasury Department-led federal panel that reviews cross-border deals for national security threats. The CFIUS-approved director would be responsible for overseeing national security issues, according to a Monday regulatory filing by Sprint that was first reported by The Wall Street Journal.

The government reportedly is also seeking the right to approve some of Sprint's equipment purchases and wants the removal of Chinese-made equipment from a Sprint network.

Clearwire Corp., which Sprint is acquiring, uses some equipment from China's Huawei Technologies Co. Ltd. in its network. Softbank also has business relationships with Huawei and ZTE Corp., which are China's two largest makers of phone-network equipment that purportedly have ties to the Chinese military. Huawei has been blocked by CFIUS from doing some U.S. deals.

Negotiations between Softbank and the government continue, as Sprint shareholders are set to vote on Softbank's $20 billion offer for a 70% stake on June 12. Softbank has said it expects to receive approval from CFIUS on May 28 and from the Federal Communications Commission on May 29. The company plans to close the deal July 1 if shareholders approve the merger.

Dish Network has made a $25.5 billion alternative bid for Sprint and has aggressively raised CFIUS concerns about Softbank's deal to turn shareholder support toward its own bid.

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