Urges Holders to Vote AGAINST the Proposed Merger by Voting the GOLD Proxy Card
HOUSTON, May 6, 2013 — Crest Financial Limited, the largest minority stockholder of Clearwire Corporation (NASDAQ: CLWR) with an ownership of 8.25%
of the Class A common stock of Clearwire, today formally began its campaign to persuade Clearwire stockholders to reject the proposed merger with Sprint Nextel Corporation by mailing its proxy statement to the Clearwire stockholders. The proxy
statement was cleared by the Securities and Exchange Commission last Friday, Crest said.
Crest also announced that an experienced team of
trial lawyers from Quinn Emanuel Urquhart & Sullivan LLP, the largest U.S. law firm devoted solely to business litigation, will prosecute Crest’s claims against Sprint and Clearwire in Delaware’s Chancery Court. John B. Quinn,
founder and managing partner of Quinn Emanuel, will personally lead the trial team. Quinn Emanuel litigates many of the biggest and most noteworthy business cases in the U.S., with a 90 percent winning record.
“As the controlling stockholders of Clearwire, Sprint owes fiduciary duties—duties of loyalty and trust—which require it to protect the
interests of the company’s minority stockholders,” John Quinn said. “But instead of acting consistent with those duties, Sprint is thumbing its nose at the other stockholders and seeking to force a sale of Clearwire at a grossly
inadequate price. Clearwire directors are doing Sprint’s bidding.”
Quinn, the lead trial lawyer for Crest, added: “We
expect that litigation will result in a very substantial appraisal award or damage remedy to redress the breaches of fiduciary duty by both Sprint and the Clearwire directors.”
Crest opposes the Sprint-Clearwire merger because it believes that the Sprint offer of $2.97 in cash per Clearwire share is grossly inadequate, that the merger was structured in a way that unfairly
disadvantages minority stockholders, and that Clearwire would be better off if it remained a stand-alone company.
“We are optimistic
that the Clearwire stockholders will agree with us that the Sprint offer is unfair and block the Sprint-Clearwire merger,” said David K. Schumacher, general counsel of Crest. “Just last Friday, four other large minority stockholders owning
18.2% of Clearwire’s Class A common stock announced their agreement to oppose the Sprint-Clearwire merger. The immense value of the wireless spectrum owned by Clearwire should benefit all Clearwire stockholders and should not be handed over on
the cheap to Sprint, its controller.”
Schumacher added, “We will pursue all litigation avenues and all available remedies.”
Crest has filed a lawsuit in Delaware against Sprint, Clearwire, and the directors of Clearwire because Crest believes that the defendants
breached their fiduciary duties by scheming to extract value from Clearwire at the expense of minority stockholders. Other stockholders, including Aurelius Capital Management, have also filed suit. Crest has also petitioned the Federal
Communications Commission to stop the proposed SoftBank-Sprint and Sprint-Clearwire mergers because they would treat minority stockholders of Clearwire unfairly and the mergers would not be in the public interest.
“The battle for Clearwire has just begun,” Crest wrote to stockholders in its letter transmitting its proxy materials. “Clearwire’s
choice is not between doing nothing and accepting a grossly inadequate Sprint deal. Rather, Clearwire’s own management has presented the most promising path to maximizing stockholder value—the MCC business plan, in which Clearwire would
provide service to multiple wholesale customers in addition to Sprint. We believe that the necessary financing to enable Clearwire to pursue the MCC business plan is readily available.”
“Everyone involved in these interlocking proposals and transactions—SoftBank, Sprint, DISH, and other potential bidders—recognizes that the real prize is Clearwire and its spectrum assets.
And yet the Clearwire Board of Directors has managed to negotiate a Merger Agreement that transfers all value and leverage to Sprint instead of preserving them for all Clearwire stockholders,” Crest’s letter states. “Only a vote
‘
AGAINST
’
the Sprint-Clearwire Merger will send a firm message to the Clearwire Board of Directors and Sprint that they owe fiduciary duties to
all
Clearwire stockholders—not just to Sprint.”
D.F. King & Co, Inc. has been retained by Crest to assist it in the solicitation of proxies in opposition to the merger. If stockholder
have any questions or need assistance in voting the GOLD proxy card, please call D.F. King & Co. at (800) 949-2583. The proxy statement and cover letter can be found at
http://www.dfking.com/clwr
.
About Crest Financial Limited
Crest
Financial Limited (“
Crest
”) is a limited partnership under the laws of the State of Texas. Its principal business is investing in securities.
Important Legal Information
In connection with the proposed merger of Clearwire with
Sprint Nextel Corporation (the “
Proposed Sprint Merger
”), Crest and other persons (the “
Participants
”) have filed a definitive proxy statement with the U.S. Securities and Exchange Commission (“SEC”). The
definitive proxy statement will be mailed to the stockholders of Clearwire on or about May 6, 2013. SECURITYHOLDERS OF CLEARWIRE ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT, WHICH IS AVAILABLE NOW, AND THE PARTICIPANTS’ OTHER PROXY
MATERIALS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION RELATED TO THE PARTICIPANTS, CLEARWIRE AND THE PROPOSED SPRINT MERGER. The definitive proxy statement and all other
proxy materials filed with the SEC are available at no charge on the SEC’s website at http://www.sec.gov. In addition, the definitive proxy statement is also available at no charge on the website of the Participants’ proxy solicitor at
http://www.dfking.com/clwr
.
Forward-looking Statements
Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Undue
reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future activities and are subject to many risks and
uncertainties. Due to such risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements. Forward-looking statements can be identified by the use of the future tense or
other forward-looking words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “should,” “may,” “will,” believes,” “continue,”
“strategy,” “position” or the negative of those terms or other variations of them or by comparable terminology.
2
CREST FINANCIAL LIMITED
JPMorgan Chase Tower
600 Travis, Suite 6800
Houston, Texas 77002
May 6, 2013
Dear Fellow Clearwire
Stockholders:
Crest Financial Limited (“
Crest
”), together with its affiliates and other related
persons, owns approximately 8.25% of the outstanding Class A common stock of Clearwire Corporation (“
Clearwire
” or the “
Company
”) and is the largest independent stockholder of Clearwire.
We have been long-time investors in Clearwire. Our investment in Clearwire dates back to June 2004 when one of our affiliates sold
spectrum assets to Clearwire in exchange for shares in the Company, of which Crest received approximately 1.4 million shares. Our belief in the potential of Clearwire is demonstrated by the substantial investment we have made in the Company.
Over the past several months a broad range of fellow Clearwire stockholders have spoken out against the proposed merger (the
“
Sprint-Clearwire Merger
”) of Clearwire with Sprint Nextel Corporation (“
Sprint
”). Just last Friday, a group of stockholders with approximately 18.2% of the outstanding Class A common stock of
Clearwire announced their agreement to oppose the Sprint-Clearwire Merger. Unlike the Clearwire Board of Directors, we have listened.
Today we are distributing definitive proxy materials in opposition to the Sprint-Clearwire Merger. Crest opposes the Sprint-Clearwire Merger because Crest believes that it would be better for Clearwire to
remain a stand-alone company and pursue its long-stated business plan to exploit its valuable spectrum assets. These are our reasons:
The Merger Consideration is Grossly Inadequate
We believe that the merger consideration of $2.97 in cash per share being offered to Clearwire stockholders in the Sprint-Clearwire Merger significantly undervalues Clearwire and does not compensate
fairly the stockholders:
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The valuations of the financial advisors of the Clearwire Board of Directors and its Special Committee, Evercore and Centerview, suggested that the
implied equity value of Clearwire could be significantly higher than the $2.97 offered by Sprint. Evercore and Centerview evaluated, among other things, Clearwire management’s multiple customer case (“
MCC
”), in which
Clearwire would provide service to multiple wholesale customers in addition to Sprint. While other valuation techniques arrived at lower ranges, the discounted cash flow analyses based on the MCC resulted in implied equity value ranges of $4.14 to
$11.30 (Evercore) and $3.45 to $15.50 per share (Centerview).
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Crest’s belief that the merger consideration of $2.97 in cash per share is inadequate was confirmed by a study commissioned by Crest and prepared
by former Federal Communications Commission (“
FCC
”) Commissioner Dr. Harold Furchtgott-Roth and the Analysis Group. As discussed in our enclosed proxy statement, Dr. Harold Furchtgott-Roth calculated a valuation of Clearwire
between $9.54 and $15.50 per share.
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In the past, Clearwire’s management has stated in public disclosures that the value of its spectrum assets is between $22 to $55 billion (2010 and
2011) or at least $11 billion to $35 billion (2012). As described in our enclosed proxy statement, Sprint’s $2.97 per share price implies a value of Clearwire’s spectrum assets of only $5 billion.
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The pro forma valuations disclosed in Sprint’s proxy statement for its proposed transaction with SoftBank (the “
SoftBank-Sprint
Transaction
”) support a valuation of Clearwire of up to $13.70 per share.
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As of the date of this letter, the current market share price of Clearwire is significantly higher than $2.97 per share.
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Finally, the battle for Clearwire has just begun. DISH Chairman Charlie Ergen stated on May 2, 2013 that his real objective in bidding for Sprint was
to control Clearwire. According a Denver Business Journal report entitled
Ergen: Quest For Clearwire Drove Dish To Top SoftBank’s Sprint Bid
,
DISH tried for months last year to reach a deal to gain access to Clearwire
frequencies. Only after its efforts were rebuffed did DISH bid for Sprint. “
It’s better for us to own Sprint, because then we control Clearwire
,” Ergen said. While SoftBank has been less transparent, it conditioned its bid for
Sprint on Sprint obtaining majority ownership of Clearwire and control of the Clearwire Board of Directors. Whether DISH or SoftBank ends up winning the battle for Sprint, the winner will pursue its real objective, which is control of Clearwire and
its spectrum assets. We believe that only after the maneuverings of SoftBank, DISH, and Sprint are final will the Clearwire shareholders have a clearer picture of the near-term value of Clearwire’s spectrum.
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There are Too Many Uncertainties
Even if the merger consideration of $2.97 in cash per share were not grossly inadequate, there are too many uncertainties for Clearwire’s stockholders to vote on the Sprint-Clearwire Merger on an
informed basis:
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There is no certainty that the Sprint-Clearwire Merger will be completed. This is because the successful closing of the transaction is contingent upon
approval of the FCC, a process that is ongoing. In addition, Sprint’s obligation to consummate the Sprint-Clearwire Merger is conditioned on the successful closing of the SoftBank-Sprint Transaction or the closing of an alternative transaction,
like the DISH offer. DISH’s recent proposal to acquire Sprint has created significant uncertainty as to if and when any such transaction will be completed.
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There is no certainty that committed supporters of the Sprint-Clearwire Merger would continue their support if DISH succeeds in acquiring Sprint.
Comcast, Intel, and Bright House, who collectively hold approximately 13% of the common stock of Clearwire, entered into a voting agreement with Clearwire in which they commit to voting in favor of the Sprint-Clearwire Merger and another agreement
that obligates them to sell their shares to Sprint if the Clearwire stockholders reject the Sprint-Clearwire Merger and Sprint consummates the SoftBank-Sprint Transaction or an alternative transaction. However, if the SoftBank-Sprint Transaction is
terminated in favor of the DISH proposal, Comcast, Intel, and Bright House have the right to terminate these agreements. Thus, the voting calculus would change significantly if Sprint accepts the DISH proposal.
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There is no transparency or credibility in the Board’s statements about the future of Clearwire. On May 1, 2013, less than one week after
Clearwire’s management stated in its April 25th earnings call that there is adequate capital to operate into the first quarter of 2014, the Board filed an Investor Presentation stating that Clearwire has a cash shortfall of $1.7 billion through
2014. We note that Clearwire has used these doomsday negotiation tactics before, most notably in prior spectrum lease negotiations. But this time they are being deployed not against a counterparty, but rather directed to the owners of Clearwire.
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Moreover, the DISH proposal raises serious questions about the future of Sprint itself, questions on which the Clearwire stockholders must have clarity
before voting for or against the Sprint-Clearwire Merger. Among these questions are:
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whether DISH or SoftBank will acquire Sprint;
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how Sprint’s new owner will use its position as Clearwire’s majority stockholder to develop an independent Clearwire; and
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whether Sprint’s new owner will attempt to use the Clearwire spectrum assets as a means to reduce Sprint’s debt or its own debt instead of
investing in an independent Clearwire.
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In light of these and other related questions, we wonder how the
Clearwire Board of Directors could press ahead with the stockholder vote on the Sprint-Clearwire Merger.
There is an Alternative Path
Clearwire’s choice is not between doing nothing and accepting a grossly inadequate Sprint deal. Rather,
Clearwire’s own management has presented the most promising path to maximizing stockholder value—the MCC business plan, in which Clearwire would provide service to multiple wholesale customers in addition to Sprint. We believe that the
necessary financing to enable Clearwire to pursue the MCC business plan is readily available:
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Months ago, we endorsed the suggestion from Mount Kellett Capital Management, the second largest independent stockholder of Clearwire, that a sale of
excess spectrum would enable Clearwire to improve its liquidity, pursue its build-out plans, and explore alternatives to being dominated by Sprint.
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Clearwire has received multiple offers to sell excess spectrum: DISH has offered to purchase 24% of Clearwire’s spectrum for $2.2 billion, and
Verizon Wireless also made an offer to purchase spectrum leases for approximately $1.0 to $1.5 billion.
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The path to independence that we and other parties have offered Clearwire need not be blocked by its fear of inadequate liquidity. Crest and Aurelius
Capital Management, another large independent stockholder of Clearwire, separately have offered debt financing for an aggregate of $320 million on terms similar to, but more favorable than, Sprint’s financing terms. In order to show our
willingness to support Clearwire’s further capital needs, Crest told Clearwire in our proposal letter that we stand ready to consider alternative financing terms to meet Clearwire’s actual near-term capital needs if the assumptions of
Clearwire’s capital needs we used in formulating our proposal required adjustment.
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Crest believes that the warnings in Clearwire’s proxy statement of a Clearwire bankruptcy or debt default are overstated to create support for the
Sprint-Clearwire Merger.
First
, during its earnings call on April 25, 2013, Clearwire’s management stated there is adequate capital to operate into Q1 2014.
Second
, Sprint has disclosed that if Clearwire defaults on its debt, a
cross default may occur under Sprint’s own debt documents if Clearwire is considered a subsidiary under those agreements. Thus, a Clearwire debt default could have a significant adverse effect on Sprint.
Third
, as the largest Clearwire
stockholder, Sprint faces many of the same risks as Clearwire’s minority stockholders if Clearwire were to file for bankruptcy protection. In light of this, we question whether Sprint will allow Clearwire to default on its debt or seek
protection under bankruptcy laws.
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We Believe the Clearwire Board Breached its Fiduciary Duties
Crest, Aurelius Capital Management, and other stockholders of Clearwire have filed lawsuits in the Delaware Court of Chancery, alleging
that the Clearwire Board of Directors has been unfairly influenced by Sprint and that each of the Clearwire directors and Sprint has breached its fiduciary duties by entering into an unfair and coercive transaction that is harmful to the minority
stockholders. These lawsuits are still pending, and during a January 10, 2013 hearing Chancellor Leo Strine, the presiding judge in our case, stated: “
I think there are colorable claims here.
” We have engaged noted trial lawyer John
Quinn of the Quinn Emanuel Urquhart & Sullivan law firm to lead the effort to prosecute the trial for money damages and injunctive relief, or potentially to pursue a separate claim for appraisal. Crest intends to aggressively pursue its rights
as a minority stockholder.
Among the reasons why we believe the Clearwire Board of Directors has breached its fiduciary
duties are:
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No Termination Right to Pursue Superior Proposals
.
Although the Clearwire Board of Directors has a fiduciary duty to obtain the
highest price reasonably obtainable for Clearwire stock, it inexplicably failed to negotiate for the right to terminate the Merger Agreement with Sprint to pursue a superior, alternative transaction. The Clearwire Board of Directors also agreed
that the Company will hold a stockholder vote even if the Clearwire Board of Directors recommends against the Sprint-Clearwire Merger. As a result, the Clearwire Board of Directors is prohibited by the Merger Agreement from accepting
DISH’s $3.30 per share proposal, although it is clearly superior to Sprint’s $2.97 per share offer.
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Locked-Up Financing
.
In connection with the signing of the Merger Agreement with Sprint, the Clearwire Board of Directors agreed
to accept up to $800 million in financing from Sprint in exchange for notes that are convertible at the highly dilutive price of $1.50 per share. This convertible debt arrangement leaves Clearwire’s minority stockholders with an unfair
choice: either vote in favor of the Sprint-Clearwire Merger or agree to share dilution at the hands of Sprint. What is even worse is that the Clearwire Board of Directors agreed to a covenant in the Merger Agreement that requires Clearwire
to obtain consent from Sprint for any alternative financing. As demonstrated by its refusal to consent to the clearly superior financing offers of Crest and Aurelius Capital Management, Sprint is abusing this consent right to the detriment of
Clearwire and its minority stockholders.
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Ineffective Special Committee
.
We believe that the Special Committee of the Clearwire Board of Directors, established to
consider the Sprint-Clearwire Merger, is not independent and disinterested. Instead, the members of this Special Committee have either been nominated by the same companies that have agreed in a voting agreement to vote FOR the Sprint-Clearwire
Merger or have been employed by Sprint.
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Bar on Pursuing Alternatives to Sprint
.
Clearwire cannot fruitfully pursue a sale of excess spectrum. The Merger Agreement
prohibits Clearwire from selling any of its excess spectrum, without Sprint’s consent, notwithstanding the presence of DISH and Verizon, current bidders ready to give Clearwire the funding it needs in return for a portion of Clearwire’s
spectrum.
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Lack of Financing Commitment
.
Although many reports suggest that Sprint is in a weak financial position due to its low cash
reserves and significant outstanding debt obligations, the Clearwire Board of Directors did not require Sprint to produce evidence of committed financing, leaving the Sprint-Clearwire Merger subject to great uncertainty.
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In our opinion, the foregoing demonstrates that Clearwire’s corporate governance must improve
significantly. Only a vote “AGAINST” the Sprint-Clearwire Merger will send a firm message to the Clearwire Board of Directors and Sprint that they owe fiduciary duties to
all
Clearwire stockholders—not just to Sprint.
* * *
Our activism on behalf of non-Sprint stockholders stems from a simple observation. Everyone involved in these interlocking proposals and
transactions—SoftBank, Sprint, DISH, and other potential bidders—recognizes that the real prize is Clearwire and its spectrum assets. And yet the Clearwire Board of Directors has managed to negotiate a Merger Agreement that transfers all
value and leverage to Sprint instead of preserving them for all Clearwire stockholders.
We believe that there are
alternative paths available to Clearwire other than the Sprint-Clearwire Merger. Therefore, for all of the foregoing reasons, we urge you to vote “
AGAINST
” the Sprint-Clearwire Merger by signing and returning the enclosed
GOLD
proxy card.
Crest urges all stockholders
NOT
to sign or return any WHITE proxy card sent to you
by the Company.
If you have already returned the WHITE proxy card, you can effectively revoke it by voting the
GOLD
proxy card. Only your latest-dated proxy card will be counted.
If you have any questions or need assistance in voting the
GOLD
proxy
card, please contact our proxy solicitor, D.F. King & Co., Inc. at
1-800-949-2583
(toll-free).
Sincerely yours,
/s/ David K. Schumacher
David K. Schumacher
General Counsel
Crest Financial Limited
*************************************************************************************
About Crest Financial Limited
Crest is a limited partnership under the laws of the State of Texas. Its principal business is investing in securities.
Important Legal Information
In connection with the
Sprint-Clearwire Merger, Crest and other persons (the “
Participants
”) have filed a definitive proxy statement with the U.S. Securities and Exchange Commission (“
SEC
”). The definitive proxy statement has been mailed
to the stockholders of Clearwire. SECURITYHOLDERS OF CLEARWIRE ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ALL OTHER PROXY MATERIALS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION RELATED TO
THE PARTICIPANTS, CLEARWIRE, AND THE SPRINT-CLEARWIRE MERGER. The definitive proxy statement and all other proxy materials filed with the SEC are available at no charge on the SEC’s website at http://www.sec.gov. In addition, the definitive
proxy statement is also available at no charge on the website of the Participants’ proxy solicitor at http://www.dfking.com/clwr.
Forward-looking Statements
Certain statements
contained herein are forward-looking statements including, but not limited to, statements that are predications of or indicate future events, trends, plans, or objectives. Undue reliance should not be placed on such statements because, by their
nature, they are subject to known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future activities and are subject to many risks and uncertainties. Due to such risks and uncertainties, actual events may differ
materially from those reflected or contemplated in such forward-looking statements. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “should,” “may,” “will,” believes,” “continue,” “strategy,” “position,” or the negative of those terms or other variations
of them or by comparable terminology.
About Crest Financial Limited and Crest Investment Company
Crest Financial Limited is a limited partnership under the laws of the State of Texas. Its principal business is investing in securities. Crest Investment
Company is a corporation under the laws of the State of Texas. Its principal business is investing in securities and serving as the general partner of Crest Financial Limited.
Important Legal Information
In connection with the Proposed Sprint-Clearwire
Merger, Crest and other persons (the “
Participants
”) have filed a definitive proxy statement with the U.S. Securities and Exchange Commission (“
SEC
”). The definitive proxy statement will be mailed to the
stockholders of Clearwire on or about May 6, 2013. SECURITYHOLDERS OF CLEARWIRE ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ALL OTHER PROXY MATERIALS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL
INFORMATION RELATED TO THE PARTICIPANTS, CLEARWIRE AND THE PROPOSED SPRINT-CLEARWIRE MERGER. The definitive proxy statement and all other proxy materials filed with the SEC are available at no charge on the SEC’s website at http://www.sec.gov.
In addition, the definitive proxy statement is also available at no charge on the website of the Participants’ proxy solicitor at http://www.dfking.com/clwr.
Forward-looking Statements
Certain statements contained herein are forward-looking
statements including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and
unknown risks and uncertainties. Forward-looking statements are not guarantees of future activities and are subject to many risks and uncertainties. Due to such risks and uncertainties, actual events may differ materially from those
reflected or contemplated in such forward-looking statements. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as “believe,” “expect,” “anticipate,”
“intend,” “plan,” “should,” “may,” “will,” believes,” “continue,” “strategy,” “position” or the negative of those terms or other variations of them or by comparable
terminology.