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Dish puts Sprint bid for Clearwire under pressure

People walk past a Sprint store in New York December 17, 2012. REUTERS/Andrew Kelly
People walk past a Sprint store in New York December 17, 2012. REUTERS/Andrew Kelly

By Sinead Carew and Liana B. Baker

NEW YORK (Reuters) - One of the biggest minority shareholders in Clearwire Corp, on Thursday urged the wireless company to recommend against Sprint Nextel Corp's buyout offer after Dish Network Corp made a counter bid.

Crest Financial, which holds about 8 percent of Clearwire shares, said Clearwire should open itself to competitive bidding, and said that even though Dish's bid late Wednesday appeared superior it may still prove inadequate to shareholders.

In a statement late Thursday, Clearwire said it would adjourn its Friday meeting in which shareholders were expected to vote on Sprint's $3.40 per share offer, after Dish's latest counter bid of $4.40 per share. It said the meeting will reconvene on Thursday, June 13, giving the special committee nearly two weeks to decide on Dish's latest proposal.

Clearwire also said its special committee found Dish's latest proposal to be more "actionable" than Dish's previous one.

The new offer further complicates a consolidation scenario in which Dish Chairman Charlie Ergen is also competing against Japan's SoftBank Corp to buy Sprint, the No. 3 U.S. mobile service provider.

Sprint is the majority owner of Clearwire.

Some analysts speculated as to whether the Clearwire bid indicates that Dish would be happy with an investment in the smaller company or a spectrum purchase from Clearwire.

But Dish said it was not backing down from its bid for Sprint. "Our Clearwire offer in no way diminishes our interest or vision for a combined Dish/Sprint," a Dish spokesman said.

Clearwire, which in April warned it could default on debt interest payments due June 1 if the Sprint deal did not go through, said on Thursday it plans to make those payments, totaling about $255 million, on its first-priority, second-priority and exchangeable notes.

Under Sprint's December proposal to buy out Clearwire, the smaller company had the option to draw on $800 million in convertible debt in 10 monthly installments. But Clearwire said it has decided to forego the June $80 million draw under that arrangement, upon the recommendation of its special committee.

On the same day that Dish made the bid for Clearwire, Ergen and other Dish executives involved in the Sprint bid were holding meetings at Sprint's Overland Park, Kansas, campus as part of the due diligence process for that offer, according to a source familiar with the matter.

Whatever Dish's motivation for the Clearwire bid, analysts said it spells trouble for SoftBank founder Masayoshi Son and his efforts to gain approval for Softbank's $20.1 billion bid for Sprint at a shareholder vote on June 12.

Softbank had approved Sprint's bid to buy Clearwire.

BTIG telecom analyst Walter Piecyk said SoftBank should come up with a higher bid for Sprint soon, as Dish's Clearwire bid effectively reduces the value of Softbank's bid for Sprint.

"If Masa doesn't figure out how to regain control of the Clearwire process he may have a much harder time convincing Sprint shareholders that his Sprint offer is superior to Ergen's," Piecyk said.

SoftBank gained clearance to go ahead with its Sprint offer earlier this week from a key U.S. government committee but needs more regulatory approvals.

Dish, which had tried to buy Clearwire in January, appeared to strengthen its case with Clearwire by excluding conditions from the new bid that had made it very difficult for Clearwire to accept the previous offer.

Clearwire had said it could not act on the January offer from Dish for $3.30 per share because some of the bid conditions went against previous agreements that Clearwire had with Sprint.

Since Dish removed some of the conditions in its new bid, another source said that Ergen appeared to have "made a serious offer that is actionable" and that the board and its special committee will have to review the proposal carefully.

"This is a much improved offer from Dish, not just the dollar amount," said the source who asked not to be named. "He's got himself in the game now."

A money manager at one big Clearwire shareholder sounded happy with the latest offer from Dish on Thursday even as the person declined to comment specifically on the price.

Five months ago, when Dish made its first bid for Clearwire, "I don't think anybody on the special committee would have thought that we would be where we are today," the money manager said. "That's largely because of the resolve of Clearwire independent shareholders."

Clearwire shares closed up 29 percent at $4.50 on Thursday, above Dish's latest offer of $4.40, after Ergen started advertising his tender offer to Clearwire shareholders.

Any purchase of Clearwire would need approval from more than 50 percent of Clearwire's majority shareholders.

Before the latest Dish offer, many shareholders had said they were unhappy with Sprint's bid for Clearwire - even after it recently raised the price per share to $3.40 from $2.97. Crest Financial has been leading a proxy battle against the deal.

(Reporting by Sinead Carew; Additional reporting by Zeba Siddiqui; Editing by Jeffrey Benkoe, Leslie Adler and Richard Chang)

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