CLWR Clearwire Corp. - Class A (MM)

Sprint Nextel Corp. (S) is reportedly financing Clearwire Corporation (CLWR) under its buyout deal. Sprint will provide another $80 million to Cleawire in May, leaving lesser scope for Dish Network Corp.’s (DISH) takeover plan to be fulfilled despite its being a lucrative offer.   

In Dec 2012, Sprint inked an agreement to acquire the remaining 50% stake in Clearwire Corporation for $2.97 per share, amounting to a total of approximately $2.2 billion. In addition, the company also offered Clearwire a financing arrangement of $800 million that can be drawn in installments.

In January and February, Clearwire declined to receive any sum under the financing arrangement as the company was planning to consider Dish Network Corp.’s (DISH) buyout proposal of $2.28 billion. However, Clearwire moved ahead with Sprint’s deal and sort financing in March and April. After the company drew funds from Sprint in April, news surfaced that Dish is planning a possible withdrawal of its acquisition proposal if Clearwire takes additional funding from Sprint, as this would give Sprint the opportunity to increase its holding with every financing installment.  However, nothing has been apparently confirmed by Dish regarding its withdrawal of the proposal.

Going forward, in the middle of this month, Dish came up with another plan of buying Sprint. Dish’s offer of $25.5 billion to acquire Sprint has apparently outbid Softbank offer to acquire 70% of Sprint’s stake for a total consideration of $20.1 billion. Going by recent reports, Sprint is currently reviewing Dish’s offer and has received an approval to seek more details on it from Softbank.

The buyout has created interest, with speculations mounting on which company will finally be able to cut the deal. While Sprint has increased its chances by financing Cleawire, Dish’s counter offer to buyout Sprint for $7 per share (inclusive of $4.76 in cash and 0.05953 shares in Dish for each Sprint share) is a challenge for Softbank.    

However, Softbank seems fully geared for this challenge. The company has already hedged the falling yen against the U.S. dollar SoftBank hedged its Japanese currency at $1 = 82.2 yen. Moreover, Japanese banks are ready to lend at the lowest possible rate, thereby helping SoftBank to raise more debt for buying out Sprint Nextel.

Sprint, which competes with the likes of  Verizon Communications Inc. (VZ), has a Zacks Rank #3, implying a short-term (1–3 months) Buy rating.
 

 
CLEARWIRE CORP (CLWR): Free Stock Analysis Report
 
DISH NETWORK CP (DISH): Free Stock Analysis Report
 
SPRINT NEXTEL (S): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
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