Decoding McCaw Filing: $2 vs $14 per share valuation.
Sprint doesn't want to pay more than $2 per share, but McCaw insisted the spectrum assests valued the shares at $14. They compromised by agreeing the Class A shares that trade on the open market are worth $2 for now. McCaw's class B shares that represent spectrum holdings and the ability to veto a buyout offer are worth the full $14. McCaw agrees to this because if Sprint does eventually buyout Clearwire for lets say $12, the make whole clause guarantees McCaw will get that amount.
The only remaining holder of Class B shares other than Sprint is Intel. I think their filing indicates thay don't plan to buy any of McCaw's shares. Comcast and Brighthouse are compelled to divest just like TWC did even if they don't like Hesse offer. It will be interesting to see what they do next. I'm hoping Intel holds out since they will have the final remaining veto power over a bad buyout offer once the cable cos are gone.
I believe the $3.1 billion Sprint will receive on Wednesday is intended to expand the planned TD-LTE network to all of Sprint's network vision towers so Sprint/Softbank can provide the speed and capacity that would make their LTE a game changer. But if Sprint is trying to get Intel and Comcast to sell shares cheap, they probably don't want to announce this yet.
Down the road I see a one for one share exchange buyout offer from "New Sprint" as the most likely scenario. It will be interesting to see what developes this week.
probability. Hesse said himself no more deals until the deal with Softbank is completed. I'm in favor of S growing organically. They're better off picking customers that will be flocking away from PCS / TMobile. Look at what happened when S acquired Nextel, it was a disaster
Thanks. Here are a couple more thoughts on what seem to be hot topics.
If Sprint acquires greater than 50% voting rights through the purchase of McCaws shares and perhaps those of Comcast, Brighthouse and Intel, and this would require them to consolidate financials including debt, they can always do what they did before; sell shares back to Clearwire for a token amount so they fall under 50%. This is what they did with the 77 million shares they recently reaquired. So if Hesse doesn't want to consolidate he doesn't have to.
Neither Softbank or Sprint are broke or in so much debt they are at risk. "Fitch now views Sprint Nextel's liquidity as strong. In the past year, Sprint Nextel has significantly fortified its liquidity position and reduced medium-term refinancing. With its past three debt issuances and a vendor-financed secured credit agreement, the company raised an additional $8 billion of financing. During this time, Sprint has also repaid $4.7 billion of maturing debt. The company's liquidity at the end of the second-quarter 2012 was approximately $8 billion, including $6.8 billion in cash."
Softbank has reduced it debt from $34.2 billion to $18.6 billion in 6 years ahead of schedule after the Vodafone purchase. After a merger with Sprint they will have a Debt to EBITDA ratio of 2.7 according to their presentation. Toyota has a ratio of over 6.
Clearwire isn't broke either, but could be 12 months from now. Sprint is smart to keep Clearwire debt off their books until the Softbank merger closes. After the merger Sprint will receive an additional $5 billion to play with. They could then attempt to buyout Clearwire and refi the debt at much better rates under the Sprint/Softbank credit rating.