Clearwire CLWR
today announced that it has received an unsolicited, non-binding proposal (the
"DISH Proposal") from DISH Network Corporation DISH. The DISH Proposal, as
further summarized below, provides for DISH to purchase certain spectrum
assets from Clearwire, enter into a commercial agreement with Clearwire,
acquire up to all of Clearwire's common stock for $3.30 per share (subject to
minimum ownership of at least 25% and granting of certain governance rights)
and provide Clearwire with financing on specified terms.
The DISH Proposal is only a preliminary indication of interest and is subject
to numerous, material uncertainties and conditions, including the negotiation
of multiple contractual arrangements being requested by DISH (some of which,
as currently proposed, may not be permitted under the terms of Clearwire's
current legal and contractual obligations). It is also subject to regulatory
approval.
As previously announced on December 17, 2012, Clearwire has entered into a
definitive agreement with Sprint Nextel Corporation ("Sprint") for Sprint to
acquire the approximately 50 percent stake in Clearwire it does not already
own for $2.97 per share (the "Sprint Agreement"). Clearwire's ability to enter
into strategic transactions is significantly limited by its current
contractual arrangements, including the Sprint Agreement and its existing
Equityholders' Agreement.
The Special Committee of the Clearwire Board of Directors (the "Special
Committee") has determined that its fiduciary duties require it to engage with
DISH to discuss, negotiate and/or provide information in connection with the
DISH Proposal. The Special Committee has not made any determination to change
its recommendation of the current Sprint transaction. Consistent with its
obligations under the Sprint Agreement, Clearwire has provided Sprint with
notice, and the material terms, of the DISH Proposal, and received a response
from Sprint that is described below.
DISH had, prior to the announcement of the Sprint Agreement, provided
Clearwire with a preliminary indication of interest solely with respect to
acquiring certain of Clearwire's spectrum assets, on substantially the same
pricing per MHz-POP as the spectrum purchase included in the DISH Proposal
described below, and entering into a commercial agreement. Although Clearwire
worked with DISH prior to the execution of the Sprint Agreement to improve the
overall terms of that proposal, the Special Committee of the Clearwire Board
determined that the Sprint transaction was, for a number of reasons, a
more-attractive alternative for Clearwire's non-Sprint Class A stockholders
than a transaction with DISH at that time and on the terms then-proposed by
DISH.
Summary of DISH Proposal
The following is a summary of the material terms of the proposal:
* Spectrum Purchase. DISH would acquire from Clearwire spectrum covering
approximately 11.4 billion MHz-POPs ("Spectrum Assets"), representing
approximately 24% of Clearwire's total MHz pops of spectrum, for aggregate
net cash proceeds to Clearwire of approximately $2.2 billion (the
"Spectrum Purchase Price"). The net cash proceeds are prior to any
adjustment for potential tax liabilities which are likely to arise from
the sale of spectrum assets even after utilizing the existing net
operating losses. At DISH's option, Clearwire would also sell or lease up
to an additional 2 MHz of Clearwire's spectrum to DISH from a channel that
is adjacent to the Spectrum Assets at a price to be calculated in the same
manner as the Spectrum Assets.
* Commercial Agreement. Clearwire would, at DISH's request, provide certain
commercial services to DISH, including the construction, operation,
maintenance, and management of a wireless network covering AWS-4 spectrum
and new deployments of 2.5 GHz spectrum.
* Acquisition of Clearwire Shares; Governance. DISH would make an offer to
Clearwire's stockholders to purchase up to all of Clearwire's outstanding
shares at a price of $3.30 per share in cash. This tender offer would not
be dependent on Sprint's participation, but would be subject to a number
of conditions, including DISH: (i) acquiring no less than 25% of the
fully-diluted shares of Clearwire, (ii) being granted the right to
designate Clearwire board members commensurate with its pro forma
ownership percentage, (iii) receiving certain minority protections,
including the right to approve material changes to Clearwire's
organizational documents, change of control and material transactions with
related parties (unless these transactions were approved by an independent
committee of the Clearwire board and, if over a certain threshold,
supported by a written fairness opinion from a nationally recognized
investment bank) and (iv) receiving preemptive rights. In addition, the
DISH Proposal would require Clearwire to terminate the note purchase
agreement under which Sprint has agreed to provide interim financing to
Clearwire and is conditional upon the consummation of the spectrum
purchase and Clearwire being in compliance with the commercial agreement
(both as described above).
* Spectrum Purchase Price Funding. DISH would pre-fund the Spectrum Purchase
Price within three business days of signing through a senior Unsecured PIK
Debenture (the "PIK Debenture") bearing PIK interest at a rate of 6% per
annum in the event the Spectrum Assets are sold to DISH or 12% per annum
otherwise. Clearwire would be obligated to either apply the proceeds of
the pre-funding to reduce outstanding long-term debt through the
redemption or repurchase of the 2015 Senior Secured Notes and 2016 Senior
Secured Notes of Clearwire Communications LLC or, in the event that a
portion of the Network Build Financing described below is unavailable due
to the failure to receive shareholder approval, to use an equivalent
portion of the proceeds of the PIK Debenture to fund network build-out
costs; in that case, any future make up draws on the Network Build
Financing following shareholder approval would be applied to reduce debt
as provided in this sentence. If Spectrum Assets are not acquired due to a
failure to obtain required regulatory approvals, Clearwire would, within
30 days following termination of the spectrum purchase agreement, repay
the PIK Debenture plus interest at 6% per annum. If Clearwire is unable to
repay the PIK Debenture during this 30 day period, it would be entitled to
convert the principal amount and accrued interest on the PIK Debenture
into a note on terms comparable to the 2015 Senior Secured Notes
previously repaid, having a maturity of December 1, 2015.
* Network Build Financing. DISH proposes to provide additional capital to
fund a portion of Clearwire's network build-out through a credit facility
for the purchase of exchangeable notes on substantially similar terms to
those which Sprint has agreed to provide, subject to cancellation of the
Sprint Financing Agreements (as described below).
* Deal Protections. DISH expects appropriate deal protections, including a
5-day match right, similar to those included in the Sprint Agreement. DISH
would match Clearwire's termination rights as provided for in the Sprint
transaction (including the possible forgiveness of a portion of the
exchangeable notes upon certain termination events).
* Sprint Financing. DISH has indicated that the proposal will be withdrawn
if Clearwire draws on the financing under the Sprint Financing Agreements.
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