Sprint’s attempt to takeover Clearwire and save its unlimited monthly data plans is in the balance following reports that some of the wireless service provider’s shareholders had dismissed the carrier’s offer of $2.90 a share as one that “grossly undervalues the company.”
Mount Kellet, an investment firm which has a 3.6% stake in Clearwire, wrote an open letter to board members of the company asking them not to accept Sprint’s ‘lowball’ bid, says Reuters.
Sprint’s acquisition will only be able to proceed if a majority of Clearwire’s minor shareholders accept the offer. The carrier already has a majority stake in Clearwire, owning 50.45% of the company.
Mount Kellet also said it was worried about the terms of the proposed deal. It said that Sprint’s offer to pay $800 million in the interim would threaten minority shareholders, as this loan could later be converted into shares by Sprint. If it decided to do so, existing shareholders would see the value of their present holdings being diluted, said the investment firm. Further, the investors stated that they were also concerned the deal was entirely contingent on Softbank Corp’s proposed takeover of Sprint going ahead, saying that the Clearwire deal was being subjected to “unnecessary risk”.
“If Sprint wants to buy Clearwire, it should put a fair offer on the table,” said Mount Kellet. “There is no rush for the company to sell itself at a deeply discounted price.”
It remains to be seen how this will all play out, but clearly some investors believe that Sprint will up its bid in order to complete its takeover. Shares in Clearwire jumped by almost 15% during trading on Thursday, up to $3.16 per share, a clear indication that Sprint may be about to improve its offer.
Should the deal go ahead, it could prove to be a smart move for both companies, if not for some of Clearwire’s minority shareholders. For Clearwire, the deal would see it secure something in the region of $800 million, which it could use to fight off a challenge from rival T-Mobile — seen as a big threat since its planned merger with MetroPCS was announced in October.
Buying Clearwire would also help Sprint to save its unlimited monthly data plans, which have become a real challenge for the carrier to maintain in light of the excessive demands placed on its network. Should the deal go ahead, the strain on Sprint’s network would be eased dramatically, giving it the breathing space it needs to continue offering these deals.