Clearwire Chairman John Stanton is back again today urging shareholders to vote for Sprint’s $3.40 per share offer, a deal which represents a 14 percent premium over the previous $2.97 per share offer. The vote will be counted at a special meeting of shareholders on May 31, and could end the months-long back-and-forth bidding for the Bellevue broadband wireless company.
But not everyone is on board.
Crest Financial, which owns eight percent of Clearwire and has sued Sprint over its bid, said Tuesday that large Clearwire strategic shareholders like Comcast, Bright House and Intel should not be permitted to vote as minority shareholders. Those companies have pledged to vote in favor of the Sprint deal, and Crest argues that because of those pledges Clearwire has “stacked the deck in favor of Sprint.”
In order for the Sprint deal to go through, 50 percent of the minority shareholders need to vote for the $3.40 per share buyout. Sprint already owns a majority share of Clearwire.
Here’s more from Crest Financial, with Stanton’s latest letter on behalf of Clearwire below. Crest General Counsel David K. Schumacher writes:
“Clearwire has stacked the deck in favor of Sprint by including as “minority” stockholders a group holding 13% of the outstanding shares that irrevocably obligated themselves to support Sprint even at the $2.97 per share price. These shares are pledged to support Sprint regardless of the alternatives available and regardless of whether Clearwire’s Board recommends supporting Sprint’s offer. And Sprint is obligated to purchase these shares for the merger consideration—after they have been counted as the “minority”—if the vote fails and the Sprint-SoftBank merger or an alternative transaction is consummated.
That means only one thing: for all intents and purposes these are Sprint shares and their votes should not be counted as minority approval. We have filed suit to challenge Sprint’s naked interference with stockholder democracy.
The presiding judge has indicated that, in the Court’s eventual review of the transaction’s fairness, the inclusion of these shares in the minority vote count may compromise any benefit Clearwire and Sprint would assert from the vote. We are evaluating all options to provide you with better clarity about who is truly eligible to be counted as non-Sprint stockholders. Sprint must not be allowed to have its cake and eat it too.”
“Of course there is a way forward: We true minority stockholders can reject the current Sprint offer, and the Clearwire Board can allow competitive bidding for Clearwire to begin. SoftBank’s CEO Masayoshi Son has suggested publicly that even if we prevail, SoftBank will be ‘happy’ because Sprint would own 65 percent of Clearwire.
According to Son, that will be ‘good enough’ for him because ‘Clearwire would be prohibited to have any sales of frequency to outsiders and so on.’ But Masayoshi Son is wrong. Sprint will grab the additional 13% of shares from Intel, Comcast, and Bright House Networks (‘BHN’) only if Sprint actually consummates the Sprint-SoftBank merger or alternative transaction.
And we believe that if Sprint’s bid for Clearwire is rejected, neither a Sprint-SoftBank nor Sprint-DISH transaction will ever actually materialize. In that event, Intel, Comcast, and BHN would be free to maintain their collective 13% of the minority shares in an independent Clearwire. These 13% stockholders, after all, are the same stockholders who made significant investments in Clearwire as parties to the Equityholders’ Agreement even before the Company’s value became clear. Now that the Company’s value is clear, it stands to reason that they would support pursuing value through an independent Clearwire once Sprint’s gambit to divert Clearwire’s value to itself is up.
In the end, once the battle for control of Sprint is resolved, Sprint could end up exactly where it is today—with at most 50.2% ownership of Clearwire—and Intel, Comcast, and BHN could retain their rights under the Equityholders’ Agreement and an independent Clearwire could pursue value for all stockholders, not just Sprint.”
“Any vote in favor of the merger agreement would limit your range of options to recover the fair value of your shares if Sprint succeeds in its unfair bid for Clearwire. Delaware law states that only Clearwire stockholders who vote AGAINST the Sprint-Clearwire merger or ABSTAIN can elect to exercise their appraisal rights. Crest has already taken all necessary steps to perfect its appraisal rights under Delaware law.
This means that, instead of pursuing damages for breaches of fiduciary duty by Sprint and the Clearwire Board through a class action or individual action, Crest can ask the Delaware Court of Chancery to determine the fair value of its Clearwire common stock if the Sprint-Clearwire merger is consummated and certain other conditions are satisfied.
But appraisal rights are by definition individual rights. You must perfect your own appraisal rights and cannot vote in favor of the merger if you are to carry on the fight for fair value in an appraisal proceeding.”
“Crest and other stockholders who believe that the merger consideration is inadequate have options for judicial relief, including: (a) appraisal, which is an individual action seeking a fair value determination for only the complaining stockholder (i.e., any relief would not be available to a class of stockholders); (b) individual lawsuits seeking damages and other relief for breaches of fiduciary duty by Sprint and the Clearwire Board for only the complaining stockholder (as Aurelius Capital Management LP has filed); and (c) a class action lawsuit seeking damages and other relief for breaches of fiduciary duty by Sprint and the Clearwire Board (as several stockholders, including Crest, have filed). As the ongoing battle for Clearwire’s future proceeds, Crest continues to weigh all litigation options, including an appraisal proceeding or an individual action.”
“Crest encourages Clearwire’s other true minority stockholders to oppose the merger and to act now to perfect their rights to pursue fair treatment through all available avenues, including an appraisal proceeding.”
Here’s Stanton’s full letter.
May 28, 2013
Dear Fellow Stockholder:
Last week, Sprint increased its offer for Clearwire to $3.40 per share, significantly improving the value of the proposed combination.
My years with Clearwire and decades of industry experience give me a clear understanding of the company’s strengths as well as the challenges we will face in the coming months.
For me and my fellow directors, the decision about voting FOR Clearwire’s proposed merger with Sprint is clear. It is quite simply the best strategic option for all stockholders, and I once again encourage you to vote your shares FOR all of the proposals relating to the transaction with Sprint.
SPRINT SAYS THIS IS ITS BEST AND FINAL OFFER
Sprint’s increased offer price represents certain, fair and attractive value and represents a:
• 14% premium to Sprint’s previous offer of $2.97; and
• 162% premium to Clearwire’s closing share price the day before the Sprint-SoftBank discussions were first confirmed in the marketplace on October 11, 2012 when Clearwire was also speculated to be a part of that transaction.
Importantly, Sprint has stated that this represents its best and final offer to Clearwire’s unaffiliated stockholders.
LEADING PROXY ADVISORY FIRMS ISS AND EGAN JONES RECOMMENDED CLEARWIRE STOCKHOLDERS VOTE ‘FOR’ PROPOSED TRANSACTION WITH SPRINT AT THE PREVIOUS OFFER OF $2.97
Institutional Shareholder Services (“ISS”) and Egan Jones are leading independent shareholder advisers. Both companies recommended that stockholders vote FOR the proposed Sprint transaction at the previous offer of $2.97 affirming the board’s conclusion that this combination is the best strategic alternative for Clearwire’s minority stockholders.
In its report dated May 10, 2013, ISS stated:*
“The current [Sprint] offer falls within an appropriate valuation range as determined by evaluating independent analyst price targets, relative share price premia, and precedent transactions for similar spectrum.”
“Because the sales process appears to have been both extensive and well-known in the industry; CLWR’s business is increasingly unviable on a stand-alone basis; the company requires interim financing from Sprint to fund operations and satisfy interest payments…a vote FOR the transaction is warranted.”
Clearwire’s standalone prospects are risky and highly uncertain; we urge you to maximize the value of your investment in Clearwire and follow ISS’s recommendation by voting for the Sprint transaction.
MAXIMIZE THE VALUE OF YOUR INVESTMENT IN CLEARWIRE –
VOTE “FOR” THE SPRINT TRANSACTION ON THE WHITE PROXY CARD TODAY
To be direct: there is no assurance that your shares of Clearwire common stock will be able to be sold for the same or greater value in the future if this proposed transaction is not approved.
ALL REASONABLE ALTERNATIVES THOROUGHLY EXAMINED;
INCREASED SPRINT OFFER REPRESENTS BEST STRATEGIC ALTERNATIVE
FOR CLEARWIRE’S MINORITY STOCKHOLDERS
Over a two-year period, Clearwire’s board and management team engaged in an extensive process to determine and evaluate numerous strategic and financial alternatives. Following the completion of this rigorous process, both the Special Committee and the board members present voted unanimously that the Sprint transaction was the best alternative for Clearwire’s stockholders.
Other alternatives are not actionable or do not deliver better value. Most notably:
DISH: As reflected in our proxy filing on May 21, 2013, Clearwire and DISH have not had any substantive discussions since DISH made an unsolicited offer to acquire Sprint on April 15, 2013. Discussions to that point had not resulted in receipt of an actionable proposal.
Verizon: Clearwire has not received an actionable proposal in connection with Verizon’s preliminary indication of interest in buying approximately 5 billion MHz-POPs of spectrum leases located in the Company’s top 25 largest markets for a gross price of approximately $1.0 to $1.5 billion, less the present value of the spectrum leases. This would only yield after-tax net proceeds to the Company of between approximately $550 million and $850 million.
Valid proxies that have already been submitted prior to the originally scheduled May 21, 2013, Special Meeting will continue to be valid unless properly changed or revoked prior to the vote being taken at the rescheduled Special Meeting. If you previously voted against the proposed combination, you can change your vote, and I encourage you to do so.
A later-dated vote cast via the Internet, by telephone or a later-dated signed proxy card voting “FOR” the proposed combination on the WHITE proxy card, or a vote at the meeting, will cancel any previous vote, including any votes cast on a gold proxy card. A revocation of your previous vote on the gold proxy card does not count as a vote “FOR” the transaction. Voting on the WHITE card is the only way to vote FOR the proposed combination and the only way to ensure your vote is counted.
If you previously voted “FOR” the proposed combination on the WHITE proxy card, your vote will still be counted at the Special Meeting of Stockholders on May 31, 2013, and you do not need to act at this time. If you have questions or need assistance voting your shares, please contact our proxy solicitor, MacKenzie Partners, Inc., toll-free at (800) 322-2885 or call collect at (212) 929-5500.
On behalf of the Clearwire board, we thank you for your continued support.
Executive Chairman of the Board