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Sprint Fights Back on Dish's Clearwire Bid

NEW YORK ( TheStreet) -- Sprint (S) is fighting back against Dish Network's (DISH - Get Report) $4.40 a share tender offer for all of Clearwire's (CLWR) outstanding shares, claiming the blocking bid violates Delaware Law.

Dish Network proposed on May 29 to assume three seats on the company's board of directors in a tender offer for Clearwire that was cheered by Crest Financial, one of the fledgling broadband provider's top minority shareholders.

Sprint's response to Dish's proposal, however, indicates the tender offer may have little standing other than to delay the telecom's proposed takeover of Clearwire.

On Friday, Clearwire delayed a shareholder vote on Sprint's proposed $3.40 a share bid for the company's outstanding shares until June 13. The delay allows Clearwire to assess Dish's tender offer, however, Clearwire's board of directors currently remains in support of Sprint's bid.

In a letter to Clearwire, Sprint said Dish's tender offer is "not actionable" because it assumes certain governance changes that are not possible given Clearwire's agreement with its initial equity holders.

For instance, Dish assumes in its tender it can win seats on Clearwire's board of directors. Sprint maintains that, as a controlling shareholder, such a scenario of board change is impossible.

Dish's tender also violates Delaware Law, according to Sprint, because it requires Clearwire to enter into a contract to provide minority shareholders rights to access the company's board of directors. Sprint claims nomination of Clearwire directors must be done through an amendment to the company's certificate of incorporation or a voting agreement among a majority of stockholders.

Neither is possible because a majority of stockholders will not support Dish's proposal, according to Sprint. Initial equity holders in Clearwire own about 65% of the company's shares.

"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," Daniel Hesse, Sprint CEO, wrote in a Monday letter to Clearwire.

"Although DISH's revised offer is higher than Sprint's, it still possibly depends on a change in Clearwire's governance structure under its existing Equity Holders Agreement," John Hodulik, a UBS telecoms analyst, wrote in a May 30 client note. "It remains unclear whether Clearwire would be able to grant such rights without Sprint's agreement."

Clearwire was formed in 2008 through its merger with Sprint's 2.5 GHz spectrum assets and $3.2 billion in investor capital provided by the likes of Sprint, Comcast (CMSA) and Intel (INTC), among others.

"Our Board and Special Committee are continuing their independent review of DISH Network's offer to determine the best course of action for the Company and all of its stockholders. The Special Committee has not made any determination to change its recommendation of the current Sprint transaction, and we will have no further comment until they have finished their full review," Susan Johnston, a Clearwire spokesperson, said in an e-mailed statement.

Dish Network spokesperson Bob Toevs declined to comment.
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