After being snubbed by Clearwire Corp. , which backed DISH Network Corp.’s (DISH - Analyst Report) $4.40 per share offer, Sprint Nextel Corp. (S - Analyst Report) seems to gear up for vendetta. The company sued DISH Networks at Delaware Court of Chancery under the grounds of violation of the rights of Sprint and other Clearwire stockholders.
Sprint stated that if DISH’s tender offer is completed, it would infringe corporate laws of the Delaware jurisdiction and investor rights of Sprint and other interested parties.
Sprint appealed the court to enforce laws related to Clearwire’s Charter and the EHA (Equity Holder’s Agreement), which states that the DISH Offer cannot be approved without the consent of 75% of Clearwire’s holders of outstanding voting securities or without the approval of Comcast Corp. (CMCSA - Analyst Report) .
Currently, DISH Network is not only being attacked by Sprint on legal grouds, it also faces the risk of losing its race in acquiring the latter. Japanese telecom company, SoftBank has already raised its bid offer to $21.6 billion from $20.1 billion in exchange of a 78% stake in Sprint.
We see this amendment as SoftBank’s attempt to successfully counter DISH’s offer of $7.00 per share (inclusive of $4.76 in cash and 0.05953 shares in DISH for each Sprint share). Meanwhile, the fate of this imminent deal depends on Sprint’s shareholder approval, which is expected on Jun 25.
As Sprint shareholders had unanimously accepted the SoftBank bid when it was filed, we believe the latter might also succeed in winning shareholders confidence over its proposed agreement. Both the companies expect the deal to close by Jul 2013.
Sprint has a Zacks Rank #3 (Hold) rating.