Last Minute SoftBank Offer Puts Dish on the Defensive (DISH, S)

A well-known cliché says, “The best-laid plans of mice and men often go awry.” It should be peppered all over the walls of Sprint Nextel S corporate headquarters.

As The New York Times reported Sunday, eight months ago, the “plan” was a done deal. Sprint Nextel would buy full control of Clearwire Corp. CLWR and Japanese conglomerate, SoftBank would buy Sprint Nextel.

Then along came the “often go awry” part played perfectly by Dish Network Corp. DISH.

Dish muddied the waters by bidding on both Sprint and Clearwire. About two weeks ago Dish upped the Clearwire ante with a $4.40 per share bid. Sprint’s current bid is $3.40 a share.

It turns out, however that two can play the “often go awry” game.

The Wall Street Journal said Monday that SoftBank Corp. had raised its offer for Sprint from $20.1 billion to $21.6 billion. The deal, put together over the weekend, means SoftBank would now own 78 percent of Sprint. The previous offer was for 70 percent.

In the new deal, Sprint Nextel shareholders would get an additional $3 billion that SoftBank had originally planned to invest in Sprint. This means current Sprint Nextel shareholders could sell their shares for $7.65, which represents a 5 percent boost over the first offer from SoftBank.

Dish could come back with its “best and final” offer by June 18. The current Dish offer, both Sprint and SoftBank believe, will not prove to be superior to the new bid by SoftBank, despite the fact that, at $25.5 billion, it is actually worth more.

Sprint’s special committee evaluating the Dish bid released a statement saying, “Despite the Special Committee’s diligence, DISH has not put forward an actionable offer.” Sprint has, therefore, ended discussions with Dish and says it will request that DISH destroy the Sprint confidential information made available to that company.

Reuters reported Tuesday that SoftBank’s new offer caused hedge fund, Paulson & Co., Sprint’s second-biggest shareholder to switch its allegiance from Dish to the Japanese company. Paulson, Reuters reported, said it would vote all its shares in favor of the new SoftBank offer.

With a June 18 Dish counteroffer deadline and a Sprint Nextel shareholder vote set for June 25, the ball, as they say, is now in Dish’s court.

A source, familiar with Dish, told Reuters the company would not likely simply walk away. "They're moving the deck chairs around. It doesn't represent meaningful incremental value for Sprint shareholders," the person, who requested anonymity, said.

At the time of this writing, Jim Probasco had no position in any mentioned securities.