The Alibaba Group Holding Limited IPO is one of the most highly-awaited technology deals in which several investment banks are yearning to play a crucial role to earn huge underwriting and advisory fees. So, in case an investment bank aids Dish in pooling finances, it would lose the chance of playing any role in the public offering of the Chinese E-commerce player.
As a result, Dish is experiencing difficulties arranging the $9 billion debt that it needs to fulfill its deal with Sprint. Several Wall Street banks, including Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), Deutsche Bank AG DB Gold Double Long ETN (NYSEARCA:DGP), and UBS AG (ADR) (NYSE:UBS), have rejected to finance Dish due to their relationship with Softbank Corp (USA) (OTCMKTS:SFTBF) and their expectation to play an essential role in the Alibaba IPO.
Sprint is caught between the two aggressive bids, but it should prefer Softbank. Not only is the company an expert in the wireless business, but it is financially sound as well. Softbank’s financial backing would help Sprint fund its acquisition bid for Clearwire Corporation (NASDAQ:CLWR) and own its vast spectrum mass. One of the prime reasons why Sprint has become the most coveted takeover target for both Softbank and Dish is because of its relationship with Clearwire Corporation (NASDAQ:CLWR). Sprint made a $2.97 per share bid to acquire the rest of Clearwire so that the company would have complete control over the latter’s prized spectrum mass. Both Softbank and Dish have expressed a desire for Clearwire’s spectrum.
The Clearwire deal
A proxy advisory firm, Institutional Shareholder Services (ISS), has recommended that Clearwire shareholders vote for the deal on May 21. Minority shareholders, including Crest Financial and Aurelius Capital, have voiced their opinions and are against the deal, claiming that it grossly undervalues Clearwire Corporation (NASDAQ:CLWR)’s worth. However, ISS says that Sprint has fairly valued Clearwire, and that its shareholders should be in favor of the deal as it is the best alternative available for Clearwire. The regional carrier will not be able to run as a stand-alone company and needs Sprint’s assistance. Another influential proxy advisory firm, Glass Lewis & Co, has opposed the deal and isn’t convinced that Sprint is the best strategic alterative for Clearwire.
The bottom line
Sprint is caught in a tussle between Softbank and Dish. However, I would recommend Softbank’s proposal to the company. Dish has not even made proper arrangements to finance its higher bid. Also, its synergies of $11 billion seem unreal. Softbank’s proposal, on the other hand, looks more organized and well planned. The deep-pocketed carrier’s capital injection would also be crucial to conclude Sprint’s Clearwire deal. On the other hand, Dish’s offer would add to the combined entity’s debt and further stress the balance sheet. Softbank and Sprint make a better match.
The article Why Softbank Scores Better Against Dish originally appeared on Fool.com is written by Rajesh M.
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