Crest Financial seeks to block Sprint buyout of Clearwire
Crest Financial, which owns a mere 3 percent of Clearwire, is trying to derail Sprint Nextel's (NYSE: S) acquisition of the remaining shares in the wireless broadband carrier for $2.2 billion, through a class-action lawsuit intended to block the acquisition, according to a report by Reuters.
On Monday, the companies announced that Clearwire's board accepted Sprint's offer to buy the remaining shares it doesn't already own, roughly 50 percent, for $2.97 per share, or a total of $2.2 billion.
The transaction would value Clearwire at $10 billion, including net debt and spectrum lease obligations of $5.5 billion. Many analysts have interpreted Sprint's acquisition of the remaining Clearwire shares as part of an effort to close Sprint's buyout by Japan's Softbank. In October, Sprint confirmed that Softbank was looking to buy 70 percent of the United States wireless carrier for around $20 billion.
Commenting on the acquisition price, Sprint and Clearwire said in a statement: "The transaction consideration represents a 128 percent premium to Clearwire's closing share price the day before the Sprint-SoftBank discussions were first confirmed in the marketplace on October 11, with Clearwire speculated to be a part of that transaction; and, a 40 percent premium to the closing price the day before receipt of Sprint's initial $2.60 per share non-binding indication of interest on November 21."
In connection with the transaction, Clearwire and Sprint have entered into agreements that provide up to $800 million of additional financing for Clearwire in the form of notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share.
Under the agreements, Sprint has agreed to purchase $80 million of exchangeable notes per month for up to 10 months beginning in January 2013, with some of the monthly purchases subject to certain funding conditions, including conditions relating to the approval of the proposed merger and a network buildout plan.
Sprint said it has the support of Clearwire shareholders Comcast, Intel (NASDAQ: INTC) and Bright House Networks, which together control 13 percent of the shares, according to a report by the Wall Street Journal. The report said that Sprint would have to get the support of shareholders holding another 13 percent of the shares to close the transaction.
"Due to our ongoing need for substantial additional capital, we do not have the luxury of unlimited time," Erik Prusch, Clearwire's chief executive officer, was quoted as saying by the WSJ.
However, Crest Financial's effort to gain class-action status for its lawsuit could delay and even derail Sprint's and Clearwire's efforts.