Clearwire Warns Shareholders It Must Merge With Sprint or Restructure

NEWS ANALYSIS: Clearwire claims in an SEC proxy statement that its lack of cash makes a merger with Sprint imperative to avoid restructuring that could render its shares worthless.

What this boils down to is that if the merger is blocked, and Sprint doesn’t spend money to keep Clearwire alive (which it’s not obligated to do), the company will restructure, and the result could be that the existing shares in the company could become worthless. In other words, block the merger and you can lose the money you’ve invested in Clearwire.

Meanwhile, Clearwire has set up a special committee to study the Dish Network proposal as required by its fiduciary responsibilities. The special committee is considering the Dish proposal, and is in discussions with Dish, but there’s no indication that Dish has proposed a feasible route to acquiring a significant portion of Clearwire.

However, Clearwire said in a statement released shortly after the SEC filing that Sprint’s agreement to provide financing for Clearwire’s build-out has been extended to February 28. This would indicate that the stockholder meeting on the merger will likely take place by that time. Currently the SEC filing gives no date or location for the meeting.

Sprint, for its part, also weighed in on the Clearwire proxy filing, issuing a press release that called the Dish proposal “illusory” and noting that it’s based on a series of events and conditions that are unlikely or impossible given the current agreements between Sprint and Clearwire. “We are pleased the Clearwire Board continues to recommend approval of our transaction and look forward to closing our merger and delivering even greater wireless service to the American consumer,” Sprint said in its release.

Previously, Dish released a brief statement regarding its talks with Clearwire. “We look forward to working with Clearwire's Special Committee as it evaluates our proposal,” said Tom Cullen, DISH executive vice president of Corporate Development in a brief press release that indicated that there would be no further comment. A Dish spokesperson declined eWEEK requests for comments on the Clearwire SEC filing.

What this really means is that the merger between Sprint Nextel and Clearwire will move forward. It also means that any attempt to block the merger has the possibility of significant financial consequences to the shareholders.

This maneuver would also effectively freeze Dish out of the process. While it’s possible that current Clearwire shareholders might be able to get a slightly better deal per share, even that’s unlikely. Right now, it looks like the Sprint–Clearwire merger is going to happen and nothing Dish is likely to do will stop it, short of any lawsuits filed by shareholders or Dish that could delay the deal for months to come.