NEW YORK — Sprint Nextel has offered to buy out the minority shareholders of Clearwire for $2.1 billion in a deal that would give it total control of the flailing Bellevue company and also more space on the airwaves for data services.
Sprint said in a regulatory filing Thursday that it’s offering $2.90 a share for the 49 percent of the wireless network operator that it doesn’t already own.
Clearwire’s board hasn’t approved the sale but said it’s in discussions with Sprint. Clearwire shares closed up 41 cents, or 15 percent, at a 52-week high of $3.16 Thursday, suggesting that investors believe a better offer may be coming.
“If a shareholder is buying the stock over $2.90 today, that is probably a pretty good indication that they will not be voting in support of these deal terms and will push for a higher price,” Walter Piecyk, an analyst at BTIG in New York said in an email. He said the offer may have to climb to more than $5 a share to win over the majority of non-Sprint investors.
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Some analysts questioned whether there were other potential bidders, however. “It’s Sprint or nobody,” said Christopher King, a Baltimore-based analyst at Stifel Financial, in an interview before the Clearwire bid was announced Thursday. “They’re losing money hand over fist. They’re burning so much cash. At the end of the day, Clearwire’s worth what Sprint’s willing to pay for it.”
It’s been widely assumed that Sprint, the country’s No. 3 wireless carrier, would buy out Clearwire. Both companies have been pressed financially, but Sprint is getting an infusion of cash after selling 70 percent of itself to Softbank of Japan for $20 billion. Clearwire shares nearly doubled in value when that deal was announced two months ago, and got a further boost Tuesday after media reports that Sprint and Clearwire were already in talks.
Clearwire was formed by cellular pioneer Craig McCaw to take advantage of an emerging wireless technology, WiMax, which promised higher speeds and lower costs than conventional cellular technology.
Sprint was working on the same technology and, in 2008, rolled those operations into Clearwire, gaining a stake of more than 50 percent. Since then, it’s had a hot-and-cold relationship with Clearwire. Sprint uses Clearwire’s WiMax network to provide “Sprint 4G,” but the technology has been orphaned as other wireless carriers have opted for another fourth-generation technology called “LTE.” Sprint is now building out its own 4G LTE network, something that Clearwire would do as well if it had the funds.
Clearwire’s main asset is vast swaths of wireless spectrum, or space on the airwaves, that could be used to provide high data download speeds — a crucial competitive factor in today’s wireless industry. However Clearwire’s frequencies are difficult to use: They require many cell towers to cover an area, and the signals don’t penetrate well into buildings. Clearwire’s weak financials had threatened to drag Sprint down with it, and Sprint had reduced its stake to less than 50 percent.
Soon after the Softbank announcement, however, Sprint struck a deal to buy out McCaw’s stake in Clearwire. Remaining Clearwire investors include cable companies Comcast and Bright House Networks, as well as chip-maker Intel. Google sold its Clearwire stake in February for $1.60 a share, and Time Warner Cable sold in September at a similar price.
Sprint’s offer for Clearwire continues a wave of deal-making in wireless this fall. Medium-sized players are trying to strengthen their hands to compete with the top two, Verizon Wireless and AT&T. Sprint’s deal with Softbank is part of that trend, as is the deal by No. 4, Bellevue-based T-Mobile USA, to buy No. 5 MetroPCS Communications.
Sprint has 48 million subscribers that it bills directly, compared with 96 million at Verizon and 77 million at AT&T.
Clearwire serves 10.5 million subscribers, but it bills only 1.4 million of them directly. Almost all of the rest are using Sprint devices.
Shares of Sprint Nextel, based in Overland Park, Kan., closed down 2 cents at $5.64 Thursday.
The quotes from analysts Piecyk and King about the valuation of Clearwire were reported by Bloomberg News.