There’s no shame in losing if it means humiliating an enemy. That’s the upshot of an analysis of the offer by Dish Network (DISH) to acquire Clearwire (CLWR), a provider of broadband Internet service.
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As Barclays Capital argued in a note to clients Wednesday, the bid by the satellite TV firm is unlikely to succeed because it’s not materially better than the deal that Clearwire accepted – but that still requires minority shareholder approval – from Sprint (NYSE:S). The problem for Sprint is that the Dish offer looks better on the surface – $3.30 a share vs. $2.97 – even though other terms are less advantageous. A key reason for the intrusion by Dish, the note by James Ratcliffe, a telecommunications analyst, surmises, is to make Sprint look bad:
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“We view Dish’s offer to purchase Clearwire . . . as primarily an effort to disrupt the announced Sprint/Clearwire deal, rather than a serious effort to take control of Clearwire. We don’t believe Dish truly expects the offer to be accepted; the announcement is instead designed to make things as awkward as possible for the Clearwire board.”
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Nasty? If that’s the intention, it fits in with the image of Dish and its chairman, Charlie Ergen, as laid out in a very recent Bloomberg BusinessWeek article.
But Ratcliffe went on to suggest that there could be more to Dish’s move than engaging in a scorched-earth policy. Dish could end up buying some bandwidth off Clearwire, or it could form a wireless partnership with Sprint. Clearly someone thinks something will come of it; Clearwire was trading Wednesday at $3.14, up 23 cents, leaping from just under what Sprint agreed to pay to roughly halfway between there and what Dish is offering, as seen in a stock chart.
Dish stock sported a healthy gain, too, we see in a separate stock chart.
However the boardroom intrigue plays out, Ratcliffe expects Dish to come out on top, even if its strategy fails and its bid succeeds: “We view the announcement as positive for Dish, as we see little downside regardless of how events unfold, [and] negative for Sprint. . . . Dish could fund the offer, if it came to it.”
Conrad de Aenlle, a contributing editor at YCharts, has covered investment and personal-finance topics for more than 20 years, writing for The New York Times, International Herald Tribune, Los Angeles Times, Bloomberg News, Institutional Investor, MarketWatch and CBS MoneyWatch. He can be reached at email@example.com.