Sprint, Clearwire in Takeover Talks

Sprint Nextel is in talks with Clearwire Corp. to acquire the remaining shares in the WiMax pioneer it doesn’t already own in a deal valued at about $2.1 billion.

In a 13D filing with the Securities and Exchange Commission Thursday, Sprint said it received authorization from its board of directors to proceed with talks with Clearwire concerning a possible merger. According to the document, Sprint would pay $2.90 per share for the Clearwire stock it does not already own.

The price represented a 5.5% premium to Clearwire’s Wednesday close of $2.75 each, but that gap quickly closed after news of the deal broke. Clearwire stock was trading at $3.07 each (up 11.5%) in early trading Thursday. Sprint shares were down 1% (6 cents) to $5.06 in early trading.

In a statement, Clearwire acknowledged it was in discussions with Sprint and has appointed a special committee of independent directors to evaluate the proposal..

“Clearwire does not comment on ongoing negotiations with counterparties and, under the direction of the special committee, continues to be in discussions with Sprint to explore a transaction.” The company said in a statement. “There can be no assurance as to the terms of any potential transaction or that any transaction will result.”

Sprint already is the largest shareholder in Clearwire with more than 50% of its outstanding stock. The deal would give Sprint full control of the WiMax wireless broadband provider, and effectively buy out its remaining cable partners.

Sprint had been expected to make a play for the remainder of Clearwire ever since October, when it agreed to a $20.1 billion buyout offer from Japanese wireless giant Softbank.  Softbank, which has its own WiMax network in Japan, has been a big proponent of the technology and obtaining full control of Clearwire was said to be a key part of its Sprint deal.

Comcast, Time Warner Cable, Sprint, Google, Intel and Bright House initially invested in Clearwire in 2008, contributing a combined $3.2 billion. But since that time several partners have dropped out, opting to take a huge discount on their original investment. Time Warner Cable sold its 7.8% Clearwire stake in August for $1.37 each or about $66.7 million, 88% less than its original investment.  In March, Google sold its 29.4 million shares for $2.26 each, or $66.7 million, a substantial discount to its original $500 million investment.
In September, Comcast said it would convert its Class B Clearwire stake to Class A common shares, the first step in a sale.

The cable companies invested in Clearwire to secure a wireless broadband play, and though Clearwire did build out several markets, it soon ran into cash problems and was overshadowed by another technology – LTE – which has since dominated the wireless broadband space.

Earlier this year, Clearwire announced plans to build an LTE network.

In the meantime, cable operators have found a new partner in the wireless broadband game. As part of its agreement to sell its wireless spectrum to Verizon Wireless for $3.6 billion, Comcast, TWC and Bright House reached a co-marketing deal with the wireless giant that allows both sides to sell the other’s products.

According to the SEC filing, Sprint said any agreement would require that Comcast, Bright House and Intel vote in favor of the merger and against any other proposals.