Dish offers to buy Sprint for $25.5 billion
Dish Network Corp, the No. 2 U.S. satellite television provider, offered to buy Sprint Nextel Corp for $25.5 billion in cash and stock, a move that could thwart the proposed acquisition of Sprint by Japan’s SoftBank Corp.
Sprint shares soared as much as 17.8 percent after the announcement to their highest level since August 2008 and slightly topped the value of the Dish bid.
Dish’s surprise bid on Monday is the latest twist in a wave of consolidation in the U.S. wireless industry. Dish had already made a counter-offer against Sprint for Clearwire Corp, the wireless company majority-owned by Sprint.
It was also the boldest step yet by Dish Chairman Charlie Ergen, who has bought billions of dollars worth of wireless spectrum in the last few years and has been seeking some sort of deal to make use of the airwaves.
“This is the culmination of a lot of years of work. Whether it be the purchase of spectrum, entering auctions, the acquisition of Sling Media, all those things come together now with the merger with Sprint,” Ergen said on a conference call with analysts and reporters.
Dish said it would pay $4.76 per share in cash and about 0.05953 shares in Dish stock for each Sprint share. The offer, which works out to $7 per share, represents a premium of roughly 12 percent to Sprint’s close on Friday.
Sprint said it would evaluate the proposal but declined further comment.
Dish claimed its offer represented a premium of roughly 13 percent above SoftBank’s existing bid. Sprint shareholders would own 32 percent of the combined company under the Dish offer compared with a 30 percent ownership in the SoftBank deal.
Some analysts said the Dish offer could lead to a bidding war with SoftBank.
“I wouldn’t be surprised if both parties revised their offers. The Dish bid strikes me as superior from an operational perspective because they operate a U.S. business,” said RBC Capital Markets analyst Jonathan Atkin.
Sprint, the No. 3 U.S. mobile services provider, agreed in October to sell 70 percent of its shares to SoftBank for $20.1 billion. That deal is currently being reviewed by regulators.
Sprint declined to comment on the Dish offer. SoftBank could not immediately be reached for comment on Dish’s bid. SoftBank Chief Executive Masayoshi Son is known to be as fierce a competitor as Ergen, and analysts eagerly awaited his response to the Dish offer.
The combined entity would have 63.1 million retail subscribers and $50 billion in annual revenues, Dish said in a regulatory filing.
Dish said it could offer consumers immediate benefits, like bundled pricing for video, phone and Internet, and further access to unlimited data, if it were to combine with Sprint.
Ergen also said he has not formally withdrawn Dish’s $3.30 per share offer for Clearwire, but would be willing to honor Sprint’s existing agreement to buy Clearwire for $2.97 per share. Clearwire shareholders have complained that Sprint’s offer was too low.
The play for Sprint came together in the last few months as Dish started to think through all of its alternatives to gain even more spectrum, according to a source familiar with the matter.
As much as Dish wants a wireless partner, analysts said Sprint also needs a deal to compete more effectively.
“There is a realization among the smaller players in the U.S. market that they need to merge or partner to compete against Verizon and AT&T, which are both so strong commercially and in terms of network quality,” said Kester Mann, telecoms analyst at consultancy CCS Insight.
Mann said while any deal would likely strengthen Sprint, Dish’s spectrum assets would probably help support Sprint’s pricing strategy, which includes unlimited mobile data access.
Wells Fargo analyst Jennifer Fritzsche said in a note that “Ergen and his team clearly bring a better financial offer” for Sprint shareholders.
But, Fritzsche wrote, Sprint management likely prefers the SoftBank offer, given the Japanese company’s deeper background in the wireless market.