Ina Fried

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Aiming to One-Up SoftBank, Dish Offers $25.5 Billion to Buy Sprint Nextel

Satellite provider Dish Network on Monday announced a $25.5 billion bid for Sprint Nextel, countering a proposed deal from SoftBank.

Dish Ergen 5

The cash and stock deal would give Sprint owners $7 per share — $4.76 in cash, with the remainder in Dish stock.

“We are confident that the Sprint Board will share our view that this proposed merger offers an excellent opportunity for the equity holders of Sprint to realize a superior value for their shares that is unavailable to them under the SoftBank proposal,” Dish Chairman Charlie Ergen said in a letter to Sprint’s board.

In addition to what it says are better financial terms, Dish also brings its own wireless spectrum holdings.

“The DISH proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal,” Ergen said. “Sprint shareholders will benefit from a higher price with more cash while also creating the opportunity to participate more meaningfully in a combined DISH/Sprint with a significantly-enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal.”

Sprint acknowledged that it had received the Dish offer and said only that the company’s board would “evaluate this proposal carefully and consistent with its fiduciary and legal duties.”

For Dish, the move would allow it to offer a combination of wireless service, in-home and on-the-go video, as well as broadband and voice service.

Dish, which has set up a website to tout its offer, promised some $11 billion in cost savings through its deal.

The move comes amid consolidation efforts that have included AT&T’s failed bid for T-Mobile, as well as T-Mobile’s current effort to acquire MetroPCS, which is due for a rescheduled shareholder vote on April 24.

Ahead of its Sprint bid, Dish had offered to buy Clearwire, the wireless network operator that Sprint is itself in the process of trying to buy.

Ergen said at our D: Dive Into Media event in February that Dish had hoped to have its own wireless network up and running by now, but that, given the delays, it would probably need to partner with someone already in the business.

Here’s Ergen’s full letter to Sprint’s board:

On behalf of DISH Network Corporation (“DISH”), I am submitting this proposal for a merger between DISH and Sprint Nextel Corporation (“Sprint”). Our proposal provides Sprint shareholders with a superior alternative to the pending SoftBank Corporation (“SoftBank”) proposal. It provides more cash and affords your shareholders the opportunity to participate more meaningfully in a combined DISH/Sprint, which will benefit from a significantly enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal.

We are offering Sprint shareholders a total consideration of $25.5 billion, consisting of $17.3 billion in cash and $8.2 billion in stock. Sprint shareholders would receive $7.00 per share, based upon DISH’s closing price on Friday, April 12, 2013. This consists of $4.76 per share in cash and 0.05953 DISH shares per Sprint share. The cash portion of our proposal represents an 18% premium over the $4.03 per share implied by the SoftBank proposal, and the equity portion represents approximately 32% ownership in the combined DISH/Sprint versus SoftBank’s proposal of a 30% interest in Sprint alone. Together this represents a 13% premium to the value of the existing SoftBank proposal.

Our proposal provides a highly-compelling and unique opportunity for Sprint shareholders. We are offering an ownership interest in a combined company with a comprehensive product and services suite, a significantly enhanced subscriber base, considerable financial and operating scale, as well as a spectrum portfolio that would lead the industry. As a result, this merger creates sizable cost and CAPEX savings and promises extensive new revenue opportunities.
Leveraging both companies’ existing assets and expertise, we will be the only company able to offer a fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services to meet rapidly evolving customer preferences. The new company’s assets will immediately establish national cross-platform leadership and will position the company to deliver innovative services while expanding our collective subscriber base.

The proposed combination will result in synergies and growth opportunities estimated at $37 billion in net present value. This includes an estimated $11 billion in cost savings, representing approximately $1.8 billion in annual run-rate cost synergies by the third year after closing.

Further, our combined national footprints and scale will allow us to efficiently develop our joint spectrum assets to provide advanced services to the millions of homes with inferior or no access to competitive broadband services.
I am proud of the company we have built and believe we will be an excellent partner to Sprint. Like Sprint, DISH possesses a strong tradition of innovation and industry leadership. We created the third largest pay-TV provider while competing with incumbent cable monopolies and other entrenched operators. DISH has consistently led our industry in service and technology delivery with award-winning innovations like Hopper with Sling. Our history of value creation is outstanding. Investors in our 1995 initial public offering have enjoyed a total return of 27 times their original investment, significantly outperforming the broader markets and our peers. We also have a proven track record of responsible capital management.
DISH has significant experience structuring and consummating strategic transactions and only needs to complete confirmatory due diligence, which we believe can be done quickly with your cooperation. We have examined your merger agreement with SoftBank and we would be prepared to execute a definitive merger agreement on substantially similar terms and conditions. Though not a condition of our proposal, we anticipate that the pending transaction with Clearwire would be completed. We are confident that we can obtain all necessary approvals within a reasonable timeframe.

We intend to fund the $17.3 billion cash portion of the transaction using $8.2 billion of our balance sheet cash and additional debt financing. We have a proven track record in raising capital to fund strategic initiatives and have received a Highly Confident Letter from our financial advisor, Barclays, confirming our ability to raise the required financing.

We would be pleased to discuss our plans for the combined company and we are available at any time to meet with the Sprint Board, management and advisors to answer any questions about our proposed merger. We are confident that the Sprint Board will share our view that this proposed merger offers an excellent opportunity for the equity holders of Sprint to realize a superior value for their shares that is unavailable to them under the SoftBank proposal.
While it would have been our preference to have confidential discussions regarding this proposed merger, your existing agreement with SoftBank and the impending deadlines associated with your shareholder vote, will compel us to confirm our intentions publicly.

We look forward to hearing from you.

Very Truly Yours,
DISH Network Corporation
Charlie Ergen
Chairman


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