Clearwire (Nasdaq:CLWR) today mailed a letter to stockholders
regarding its proposed transaction with Sprint Nextel Corporation
("Sprint"). The letter describes the proposed transaction with
Sprint as providing the best strategic alternative for Clearwire's
minority stockholders, representing fair, attractive and certain
value.
The full text of the letter follows:
May 6, 2013
On May 21, 2013, Clearwire will hold a Special Meeting of
Stockholders to vote on the proposed Sprint transaction. Clearwire
stockholders of record as of the close of business on April 2,
2013, are entitled to vote at the Special Meeting.
PROPOSED TRANSACTION WITH SPRINT PROVIDES
THE BEST STRATEGIC ALTERNATIVE FOR CLEARWIRE'S MINORITY
STOCKHOLDERS AND REPRESENTS FAIR,
ATTRACTIVE AND CERTAIN
VALUE
Clearwire's board of directors has always been committed to
considering strategic options and pursuing those that maximize
stockholder value. A Special Committee conducted a careful and
rigorous review of all options available to Clearwire, with the
assistance of independent financial and legal advisors. On the
unanimous recommendation of the Special Committee, the Clearwire
board has unanimously concluded that the proposed transaction with
Sprint is the best strategic alternative for stockholders,
representing fair, attractive and certain value, especially in
light of the Company's limited alternatives and the well-known
constraints of its liquidity position.
The proposed $2.97 per share offer price equates to a total
payment to Clearwire minority stockholders of approximately $2.2
billion. This transaction represents a total Clearwire enterprise
value of approximately $10 billion, including net debt and spectrum
lease obligations of $5.5 billion. Additional benefits include:
- Attractive spectrum value of $0.21 / MHz – POP;
- A ~130% premium to Clearwire's closing share price on October
10, 2012, just before Sprint publicly acknowledged its merger
discussions with SoftBank, and Clearwire was speculated to be part
of that transaction;
- A 40% premium to the closing share price on November 20, 2012,
the day before Clearwire received Sprint's $2.60 per share initial
non-binding indication of interest;
- Higher certainty of value for stockholders compared to other
alternatives; and
- Immediate liquidity to stockholders at transaction close.
SPRINT PROPOSAL WAS THOROUGHLY EVALUATED
BY CLEARWIRE'S BOARD OF DIRECTORS AND SPECIAL
COMMITTEE
Clearwire formed a Special Committee, comprised of three
directors independent from Sprint. Clearwire's Special Committee
hired its own legal and financial advisors to evaluate and
negotiate the Sprint transaction. Specifically, the Special
Committee:
- Rejected Sprint's initial indication of interest of $2.60;
- Oversaw subsequent negotiations, leading to an increase in the
offer price of 14% and other more favorable terms; and
- Received a fairness opinion from its financial advisors that
the $2.97 merger consideration was fair, from a financial point of
view, to the Company's non-Sprint stockholders.
In addition to the actions taken by the Special Committee
outlined above, the Board hired its own separate, independent legal
and financial advisors and received a fairness opinion stating that
the $2.97 merger consideration was fair, from a financial point of
view, to the Company's non-Sprint stockholders.
The $2.97 per share consideration represents a substantial
premium to the price received by other sophisticated investors in
recent transactions. For example, Google received $2.26 per share
for its Clearwire Common Stock on March 1, 2012, and Time Warner
received $1.37 per share for its Clearwire Common Stock on October
3, 2012.
In addition, Eagle River received $2.97 per share for its sale
of Clearwire Common Stock on December 17, 2012.
Other stockholders consider $2.97 to be a fair and
compelling price: Comcast, Intel, and Bright House Networks have
committed to vote their shares in support of the
transaction. Collectively, these sophisticated investors
own approximately 13% of the voting shares, or approximately 26% of
non-Sprint voting shares.
CLEARWIRE'S STANDALONE PROSPECTS ARE
RISKY AND HIGHLY UNCERTAIN
The proposed transaction with Sprint provides a clear solution
to the substantial funding gap Clearwire is
facing. The Company's prospects of securing the $2-$4 billion in
additional funding necessary to continue operations and the LTE
build plan are highly uncertain. In evaluating the Sprint
transaction in the context of its funding constraints, the Special
Committee considered two sets of financial projections prepared by
Clearwire's management team:
- Single-Customer Case (SCC): Assumes Sprint remains Clearwire's
only major wholesale customer, and increases its wholesale
purchases by over 500% to over $2 billion by 2020.
- Multi-Customer Case (MCC): Requires substantial non-Sprint
network traffic beginning in 2014, which implies an immediate
agreement with another major wholesale customer.
- Industry reality is that many carriers have recently
consolidated spectrum positions and are focused on other strategic
priorities.
- Despite concerted efforts and discussions with more than 100
targets, Clearwire has failed to secure an additional major
wholesale customer.
Both SCC and MCC have significant funding gaps that need to be
addressed:
- SCC: Estimated $3.9 billion peak cash shortfall in 2017.
- MCC: Estimated $2.1 billion peak cash shortfall in 2015.
At the time Clearwire entered into the proposed Sprint
transaction, it disclosed in its third quarter 2012 filings that
the Company had 12 months of liquidity remaining, and in its first
quarter 2013 filings the Company disclosed that, even if it
curtails or suspends its LTE build, its liquidity will be depleted
in the first quarter 2014 without securing additional financing.
Moreover, the Company believes that securing the additional
financing to fund the standalone business plan would be
challenging, expensive and highly dilutive to stockholders, if
available at all.
SPRINT TRANSACTION REPRESENTS CULMINATION
OF RIGOROUS MULTI-YEAR STRATEGIC
REVIEW
The Clearwire board and management undertook an extensive,
multi-year process to explore strategic and financial alternatives
over the past two years, which the Special Committee, with its
advisors, also independently evaluated, including:
Alternative #1: Additional Wholesale
Partners
- Without a second major wholesale customer, Clearwire's business
plan is exceedingly risky due to increasing dependence upon Sprint,
its largest customer, and a significant funding gap ($3.9 billion
under SCC);
- MCC is only viable with another major wholesale customer in
addition to Sprint; and
- Success remains unlikely given industry dynamics, and potential
partners expressed a strong preference for spectrum acquisition
over a wholesale partnership due to greater control.
Conclusion: Clearwire has been unsuccessful at
attracting a second major wholesale customer, despite concerted
efforts and discussions with more than 100 targets.
Alternative #2: Monetize Excess Spectrum
- Clearwire's exhaustive sale process in 2010 involved contacting
37 parties and did not result in an agreement;
- Since then, Clearwire has engaged in a series of conversations
with a number of parties that did not result in any compelling
offers, including a market check conducted in December of
2012;
- The proceeds of any sale of spectrum could be subject to
significant tax leakage and use of proceeds restrictions under
Clearwire's existing debt agreements and thereby wouldn't provide
sufficient liquidity to the Company;
- Outstanding proposals for Clearwire's spectrum are for premium
portfolios of either primarily owned spectrum or leased spectrum
concentrated in metro markets; Clearwire is unlikely to have buyer
interest for all 47 billion MHz-POPs of spectrum above the
$0.21/MHz-POP value implied by Sprint proposal; and
- Even a sale of a meaningful block of spectrum would leave
Clearwire exposed to significant risks and would not solve
Clearwire's long-term liquidity challenges as it does not address
the fundamental need for significant additional revenues, and
potentially reduces future demand for Clearwire's network if sold
to a potential wholesale customer.
Conclusion: A spectrum sale does not address, and may
exacerbate, long-term challenges.
Alternative #3: Financing Alternatives (Debt / Equity
Financing)
- Currently, Clearwire has an annual cash interest burden of
approximately $510 million and the interest burden created from
additional debt financing will further increase cash outflows and
potentially result in an untenable capital structure;
- Under its current debt agreements, Clearwire has extremely
limited secured borrowing capacity remaining;
- Fewer than 200 million available authorized shares limit our
ability to issue significant equity financing without approval from
a majority of stockholders (i.e. Sprint); and
- New unsolicited financing offers from Crest and Aurelius are
not actionable at this time without Sprint's approval.
Conclusion: Debt or equity financing
would have unattractive terms, and would be very expensive and
dilutive to existing stockholders.
Alternative #4: Partnerships / Other Strategic
Transactions
- Clearwire would not be able to sell the whole Company as Sprint
has stated that they are not willing sellers; and
- Under existing agreements, Clearwire's ability to offer
meaningful governance rights to new partners is limited.
Conclusion: A sale of the Company to a
third party other than Sprint is unlikely to occur due to
Clearwire's governance structure and Sprint's unwillingness to sell
its stake.
Alternative #5: Financial Restructuring /
Bankruptcy
- Clearwire's difficult liquidity situation will put it in a
worse position to negotiate any other strategic transaction, and
financial restructuring may be the only available alternative;
- Clearwire engaged Blackstone Advisory Partners and Kirkland
& Ellis LLP to explore the possibility of a financial
restructuring in fall of 2011, and has spent significant time with
these advisors to understand the implications and risks of
restructuring;
- The process could take 24 months or longer and stockholders
would be unlikely to receive any value prior to completion;
and
- The outcome of a financial restructuring is subject to many
uncertainties, including:
− The existence of buyers in an auction for the entire Company;
− The ability to sell the entire spectrum portfolio without
flooding the market at non-distressed prices; − Potential taxes on
spectrum sales which could materially reduce value to stockholders;
and − Potential damages claims by Sprint which could be substantial
and could reduce value to stockholders, among others.
Conclusion: Represents a highly uncertain outcome for
Clearwire stockholders, and unlikely to yield value to stockholders
exceeding $2.97 per share.
Given the comprehensive reviews of the alternatives, the
Special Committee and board of directors determined that the Sprint
transaction is in the best interests of the Company's non-Sprint
stockholders.
MAXIMIZE THE VALUE OF YOUR INVESTMENT IN
CLEARWIRE. VOTE "FOR" THE SPRINT TRANSACTION ON THE WHITE PROXY
CARD
The Clearwire board unanimously recommends that you vote
your shares FOR all of the proposals relating to the
proposed transaction with Sprint by returning the
WHITE proxy card with a "FOR" vote for all
proposals. The failure to vote or an abstention has the same effect
as a vote against the proposed combination. Because some of the
proposals required to close the proposed transaction requires the
affirmative vote of 75% of all outstanding shares, the votes of all
of Clearwire stockholders are important. If stockholders do
not approve the proposals related to the proposed combination,
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.
We urge you to discard any gold proxy cards you may receive, as
they were sent by a dissident stockholder. If you previously
submitted a gold proxy card, we urge you to cast your vote as
instructed on the WHITE proxy card as soon as you
receive it. A vote on the WHITE proxy card will
revoke any earlier dated proxy card that was submitted, including
any white proxy card. 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 your board of directors, we thank you for your
continued support.
Sincerely,
John Stanton Chairman of the Board
|
If you have any questions, require
assistance with voting your WHITE proxy card, |
or need additional copies of the
proxy materials, please contact: |
|
MacKenzie Partners, Inc. |
|
105 Madison Avenue |
New York, NY 10016 |
|
proxy@mackenziepartners.com |
|
(212) 929-5500 (Call Collect) |
Or |
TOLL-FREE (800) 322-2885 |
|
Cautionary Statement Regarding Forward-Looking
Statements
This document includes "forward-looking statements" within the
meaning of the securities laws. The words "may," "could," "should,"
"estimate," "project," "forecast," "intend," "expect,"
"anticipate," "believe," "target," "plan," "providing guidance" and
similar expressions are intended to identify information that is
not historical in nature.
This document contains forward-looking statements relating to
the proposed merger and related transactions (the "transaction")
between Sprint and Clearwire. All statements, other than historical
facts, including statements regarding the expected timing of the
closing of the transaction; the ability of the parties to complete
the transaction considering the various closing conditions; the
expected benefits and efficiencies of the transaction; the
competitive ability and position of Sprint and Clearwire; and any
assumptions underlying any of the foregoing, are forward- looking
statements. Such statements are based upon current plans, estimates
and expectations that are subject to risks, uncertainties and
assumptions. The inclusion of such statements should not be
regarded as a representation that such plans, estimates or
expectations will be achieved. You should not place undue reliance
on such statements. Important factors that could cause actual
results to differ materially from such plans, estimates or
expectations include, among others, any conditions imposed in
connection with the transaction, approval of the transaction by
Clearwire stockholders, the satisfaction of various other
conditions to the closing of the transaction contemplated by the
merger agreement, and other factors discussed in Clearwire's and
Sprint's Annual Reports on Form 10- K for their respective fiscal
years ended December 31, 2012, their other respective filings with
the U.S. Securities and Exchange Commission (the "SEC") and the
proxy statement and other materials that have been or will be filed
with the SEC by Clearwire in connection with the transaction. There
can be no assurance that the transaction will be completed, or if
it is completed, that it will close within the anticipated time
period or that the expected benefits of the transaction will be
realized.
Clearwire does not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events. Readers are cautioned not to
place undue reliance on any of these forward-looking
statements.
Additional Information and Where to Find It
In connection with the transaction, Clearwire has filed a Rule
13e-3 Transaction Statement and a definitive proxy statement with
the SEC. The definitive proxy statement has been mailed to the
Clearwire's stockholders. INVESTORS AND SECURITY HOLDERS ARE
ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT
MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT
CLEARWIRE AND THE TRANSACTION. Investors and security holders may
obtain free copies of these documents and other documents filed
with the SEC at the SEC's web site at www.sec.gov. In addition, the
documents filed by Clearwire with the SEC may be obtained free of
charge by contacting Clearwire at Clearwire, Attn: Investor
Relations, (425) 505-6494. Clearwire's filings with the SEC are
also available on its website at www.clearwire.com.
Participants in the Solicitation
Clearwire and its officers and directors and Sprint and its
officers and directors may be deemed to be participants in the
solicitation of proxies from Clearwire stockholders with respect to
the transaction. Information about Clearwire officers and directors
and their ownership of Clearwire common shares is set forth in the
definitive proxy statement for Clearwire's Special Meeting of
Stockholders, which was filed with the SEC on April 24, 2013.
Information about Sprint officers and directors is set forth in
Sprint's Annual Report on Form 10-K for the year ended December 31,
2012, which was filed with the SEC on February 28, 2013. Investors
and security holders may obtain more detailed information regarding
the direct and indirect interests of the participants in the
solicitation of proxies in connection with the transaction by
reading the definitive proxy statement regarding the transaction,
which was filed by Clearwire with the SEC.
CONTACT: Media Contacts:
Susan Johnston, (425) 505-6178
susan.johnston@clearwire.com
JLM Partners for Clearwire
Mike DiGioia or Jeremy Pemble, (206) 381-3600
mike@jlmpartners.com or jeremy@jlmpartners.com
Investor Contacts:
Alice Ryder, (425) 505-6494
alice.ryder@clearwire.com
MacKenzie Partners for Clearwire
Dan Burch or Laurie Connell, (212) 929-5500
dburch@mackenziepartners.com or lconnell@mackenziepartners.com
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