Dish Network launches $25.5-bn bid for Sprint Nextel
16 April 2013
US satellite-TV provider Dish Network yesterday launched a $25.5-billion unsolicited bid for Sprint Nextel, trumping an agreed $20.1 billion takeover of the third-largest wireless carrier in the US by Japanese telecom giant SoftBank.
Dish Network, based in Englewood, Colorado, is offering to pay $4.76 in cash and about $2.24 in stock, a 13-per cent premium to Softbank's complex proposal of buying 70 per cent of Sprint for $20.1 billion.
Dish Network, the nation's third-largest pay TV provider, with 14 million customers, said that the merger would allow it to bring television, high-speed internet and mobile services into a single package and market it to Sprint's 55 million customers.
Highlighting the superior proposal, Charlie Ergen, chairman of Dish said, "The Dish proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal."
"Sprint shareholders will benefit from a higher price with more cash while also creating the opportunity to participate more meaningfully in a combined Dish / Sprint with a significantly enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal," he added.
Dish sees synergies and growth opportunities estimated at $37 billion in net present value, including an estimated $11 billion in cost savings, representing approximately $1.8 billion in annual run-rate cost synergies by the third year after closing.
Dish intends to fund the $17.3 billion cash portion of the transaction using $8.2 billion from its cash reserves and the balance through debt financing.
The unsolicited offer comes six months after Tokyo-based SoftBank, Japan's third-largest mobile phone company, offered to buy 70 per cent of Sprint Nextel for $20.1 billion. (See: Japan's Softbank to buy 70% stake in Sprint Nextel for $20.1 bn)
This deal has been agreed to by the board of both companies, but still needs approval from Sprint shareholders and US regulators.
Under the deal, SoftBank, run by Masayoshi Son, would pay $12.1 billion to buy existing Sprint shares at $7.30 per share, while the remaining $8 billion will go towards buying new shares at $5.25 each.
SoftBank will form a new US subsidiary, New Sprint, which will invest $3.1 billion in a newly issued Sprint convertible senior bond. The convertible bond will have a 7-year term and 1 per cent coupon rate, and will be convertible, subject to regulatory approval, into Sprint common stock at $5.25 per share.
Immediately prior to the merger, the bond will be converted into shares of Sprint, which will become a wholly-owned subsidiary of New Sprint.
Following Sprint stockholder and regulatory approval, SoftBank will further capitalise New Sprint with an additional $17 billion and effect a merger transaction in which New Sprint will become a publicly-traded company and Sprint will survive as its wholly-owned subsidiary.
The deal includes a $600 million termination fee.
Sprint holds a 47.1-per cent stake in wireless network operator Clearwire Corporation, which holds valuable spectrum.
In January, Dish offered to buy Clearwire for $2.2 billion, a move seen as a plan to bring Sprint to the negotiating table, but Sprint had already reached a deal to acquire the rest of Clearwire.
Sprint Nextel confirmed it has received an unsolicited proposal from Dish Network and said in a statement that its board of directors will evaluate the proposal in line with its fiduciary and legal duties. ''The company does not plan to comment further until the appropriate time.''
Analysts expect Softbank to stay and fight, although it can walk away and be richer by more than $3.5 billion through the acquisition-related profits from currency hedging, a convertible bond and break-up fee, according to a Reuters report.
Dish, a Fortune 200 company, has approximately 14.056 million satellite TV customers and has the largest high definition line-up with more than 200 national HD channels.