Sprint has filed a lawsuit against Dish Network and Clearwire to try and prevent the satellite broadcaster’s tender offer for the US wholesaler from being realised.
The US mobile operator adds that the satellite broadcaster has repeatedly tried to “fool” Clearwire shareholders into believing its proposal to acquire the spectrum of the US wholesaler was actionable.
Sprint was miffed when the Clearwire board recently recommended an upped offer from Dish for the 49.8 per cent equity it does not own in the US wholesaler. Sprint previously had the backing of the Clearwire board for its own bid.
But in a statement on Monday (17 June), announcing it had filed a complaint against Dish and Clearwire in the Delaware Court of Chancery, Sprint is scathing about the Dish tender offer and the Investors Rights Agreement (IRA) and Note Purchase Agreement (NPA) put forward by the satellite broadcaster.
Sprint argues that they all violate the rights of both Sprint and Clearwire’s other strategic investors.
Under Clearwire’s charter and the Equity Holders Agreement (EHA), Sprint maintains that the Dish tender offer (together with IRA and NPA) cannot be completed without the approval of holders of at least 75 per cent of Clearwire’s outstanding voting securities and a thumbs up from Comcast. Neither of these approvals have been obtained and completion of the tender offer without them, argues Sprint, would be unlawful.
Sprint adds that the IRA requires Clearwire to place and maintain a number of Dish designees on its board of directors in breach of the provisions in the EHA permitting Sprint to nominate seven directors; the Significant Investors Group to nominate several other directors; and the nominating committee to nominate the remainder.
Without mincing words, Sprint alleges the Dish offer is “unlawfully coercive because it threatens to leave non-tendering shareholders holding shares in a company subject to governance deadlocks or substantial damage awards to Dish if Clearwire is unable to deliver on the unenforceable promises set forth in the IRA and NPA”.
As well as trying to block the tender offer, “Sprint’s lawsuit seeks to rescind certain parts of the tender offer agreement and seeks declaratory, injunctive, compensatory and other relief”.
Sprint’s lawsuit against Dish comes on the eve of a deadline today (18 June) for the satellite broadcaster to make a “best and final” takeover offer for Sprint.
Dish has been in competition with Japan’s SoftBank since April to take a majority holding in the US mobile operator.
However, the Sprint board, on 10 June, approved a revised offer from SoftBank while claiming that Dish had not put forward an actionable proposal.
Dish has until today to convince the Sprint board otherwise.