Dish Network sprints to beat Softbank to buy Sprint
$25.5b Bid competes with SoftBank in attempt to scoop up some additional wireless assets
Monday April 15th, 2013: In a major announcement today, Dish Network (DISH), the Englewood, Colorado-based satellite TV company, announced it was making a $25.5b offer for Sprint Nextel Corp (S). The announcement is clearly an attempt to outbid Japanese phone giant SoftBank's $20.0 bid to acquire 70% of Sprint.
According to the early details available, the acquisition will be a cash & stock offering, providing Sprint stockholders $7 per share. That's roughly a 13% premium over the $22 closing price of Sprint shares on Friday 12th April. The deal will include $8.2b in stock, and $17.3b in cash. Incidentally, DISH's claims that net-net, its offer will be a 13% premium to its rival's bid.
For DISH, which has credible wireless spectrum assets on its balance sheet, this acquisition means a lot, since its wireless strategy is still a bit murky. Acquiring a piece (or all) of Sprint will definitely provide it the leverage it needs to get into the game. However, the company is still awaiting a decision on its earlier bid to acquire another rival, Clearwire (CLWR).
Meanwhile, in what can only be described as a "corporate version" of Sex and the City, Sprint has been courting CLWR, of which it is a majority stakeholder now, with a shareholders vote imminent to decide on the Sprint offer. The third wheel in this corporate love triangle was – you guessed it: DISH! However, CLWR management has recommended that its shareholders vote in favor of $2.97 per share Sprint offer over the $3.30 offer made by DISH.
Should Dish succeeded in the acquisition effort announced today however, and manages to get a controlling stake in Sprint, then it is likely that it will back down from the CLWR deal.
So what should you do if you are a shareholder in either DISH or Sprint? Well, for now, you would be well advised to try and find out as much as possible about the deal, including whether there is a possibility of another "White Knight" who might come riding out to Sprint's rescue with an even higher bid.
Quite often, the conventional wisdom is: Buy on rumor and sell on news. And although today's announcement appears to me more than rumor, you may want to consider taking some position in either of these players.
Good luck in your investing. Let us know if you have any questions, comments or feedback,
MarketConsensus Stock Analysis Team