The wireless business continues to go through some wild transformations, and the latest example happened Monday morning as Dish Network announced a $25.5 billion bid for Sprint Nextel. That follows the satellite TV provider’s previous offer to gobble up Clearwire for $3.30 per share, slightly more than $2.97 per share offer from Sprint.
Making matters more complicated, Japan’s Softbank is currently attempting to buy 70 percent of Sprint for $20.1 billion, with The Wall Street Journal calling that deal a “complicated proposal.” According to Dish, its offer comes as a 13 percent premium to the one being proposed by Softbank. Sprint also is the much larger company, with more than double the revenue of Dish last year.
“The Dish proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal,” said Charlie Ergen, chairman of Dish Network in a release. “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.”
Clearwire has said that it continues to weigh the offer from Dish, though it has continued to take payments from its majority owner partner Sprint. Clearwire’s shares fell two percent in trading this morning.
Here’s the letter that Ergen sent to Sprint’s Chairman James H. Hance Jr.
Dear Jim:
On behalf of DISH Network Corporation (“DISH”), I am submitting this proposal for a merger between DISH and Sprint Nextel Corporation (“Sprint”). Our proposal provides Sprint shareholders with a superior alternative to the pending SoftBank Corporation (“SoftBank”) proposal. It provides more cash and affords your shareholders the opportunity to participate more meaningfully in a combined DISH/Sprint, which will benefit from a significantly enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal.
We are offering Sprint shareholders a total consideration of $25.5 billion, consisting of $17.3 billion in cash and $8.2 billion in stock. Sprint shareholders would receive $7.00 per share, based upon DISH’s closing price on Friday, April 12, 2013. This consists of $4.76 per share in cash and 0.05953 DISH shares per Sprint share. The cash portion of our proposal represents an 18% premium over the $4.03 per share implied by the SoftBank proposal, and the equity portion represents approximately 32% ownership in the combined DISH/Sprint versus SoftBank’s proposal of a 30% interest in Sprint alone. Together this represents a 13% premium to the value of the existing SoftBank proposal.
Our proposal provides a highly-compelling and unique opportunity for Sprint shareholders. We are offering an ownership interest in a combined company with a comprehensive product and services suite, a significantly enhanced subscriber base, considerable financial and operating scale, as well as a spectrum portfolio that would lead the industry. As a result, this merger creates sizable cost and CAPEX savings and promises extensive new revenue opportunities.
Leveraging both companies’ existing assets and expertise, we will be the only company able to offer a fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services to meet rapidly evolving customer preferences. The new company’s assets will immediately establish national cross-platform leadership and will position the company to deliver innovative services while expanding our collective subscriber base.
The proposed combination will result in synergies and growth opportunities estimated at $37 billion in net present value. This includes an estimated $11 billion in cost savings, representing approximately $1.8 billion in annual run-rate cost synergies by the third year after closing.
Further, our combined national footprints and scale will allow us to efficiently develop our joint spectrum assets to provide advanced services to the millions of homes with inferior or no access to competitive broadband services.
I am proud of the company we have built and believe we will be an excellent partner to Sprint. Like Sprint, DISH possesses a strong tradition of innovation and industry leadership. We created the third largest pay-TV provider while competing with incumbent cable monopolies and other entrenched operators. DISH has consistently led our industry in service and technology delivery with award-winning innovations like Hopper® with Sling®. Our history of value creation is outstanding. Investors in our 1995 initial public offering have enjoyed a total return of 27 times their original investment, significantly outperforming the broader markets and our peers. We also have a proven track record of responsible capital management.
DISH has significant experience structuring and consummating strategic transactions and only needs to complete confirmatory due diligence, which we believe can be done quickly with your cooperation. We have examined your merger agreement with SoftBank and we would be prepared to execute a definitive merger agreement on substantially similar terms and conditions. Though not a condition of our proposal, we anticipate that the pending transaction with Clearwire would be completed. We are confident that we can obtain all necessary approvals within a reasonable timeframe.
We intend to fund the $17.3 billion cash portion of the transaction using $8.2 billion of our balance sheet cash and additional debt financing. We have a proven track record in raising capital to fund strategic initiatives and have received a Highly Confident Letter from our financial advisor, Barclays, confirming our ability to raise the required financing.
We would be pleased to discuss our plans for the combined company and we are available at any time to meet with the Sprint Board, management and advisors to answer any questions about our proposed merger. We are confident that the Sprint Board will share our view that this proposed merger offers an excellent opportunity for the equity holders of Sprint to realize a superior value for their shares that is unavailable to them under the SoftBank proposal.
While it would have been our preference to have confidential discussions regarding this proposed merger, your existing agreement with SoftBank and the impending deadlines associated with your shareholder vote, will compel us to confirm our intentions publicly. We look forward to hearing from you.
Very Truly Yours,
DISH Network Corporation
Charlie Ergen
Chairman
