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.

Clearwire’s filing of a preliminary proxy with the Securities and Exchange Commission on Feb. 1 makes it clear that the merger of Clearwire and Sprint Nextel is going to happen, absent some unlikely and unexpected roadblocks.

The statements made by the companies subsequent to the proxy filing also make it clear that the proposal by satellite television broadcaster Dish Network to buy part of Clearwire is probably going nowhere.

A close look at the proxy shows a few important things that make the merger all but a done deal. First of all, Sprint already owns 50.4 percent of Clearwire, and it’s certain that Sprint will vote its majority ownership in favor of the merger. In addition, Comcast, Bright House Networks and Intel along with a few others own an additional 13 percent of Clearwire, and according to the proxy, these shares will also be voted in favor of the merger.

Because of the commitments of the parties involved, it’s a sure thing that a quorum of stockholders will either show up at the stockholders’ meeting, or will vote by proxy. The SEC filing says these shareholders have “agreed to vote all of their shares of our common stock in favor of the proposals to adopt the Merger Agreement, to amend the Company’s Certificate of Incorporation, to authorize the issuance of additional shares of Class A common stock and Class B common stock and to adjourn the Special Meeting.”

While it’s a sure thing that a majority of the shares of Clearwire will be voted in favor of the merger, that doesn’t rule out a suit by shareholders to block the merger, or a suit by Dish claiming that they should be allowed to buy part of Clearwire and have a say in its governance. However, the proxy makes it very clear what the consequences of a failed merger would be.

“If the Merger is not completed, we may be forced to explore all available alternatives, including financial restructuring, which could include seeking protection under the provisions of the United States Bankruptcy Code,” Clearwire stated in its proxy statement.

Clearwire claims in the statement that its future as a going concern depends on completing the merger with Sprint.

“Excluding any financing by Sprint pursuant to the Note Purchase Agreement, the Company currently has capital resources that it believes to be sufficient to support its operations into approximately the fourth quarter of 2013. If the Merger is not completed, the Company may not be able to raise sufficient capital to continue its existing operations beyond that time. We can give you no assurance that in a restructuring you would receive any value for your shares or a value equal to or in excess of the Merger Consideration,” the statement said.