Sprint Nextel Corporation (S): DISH Network Corp (DISH) Looking to Become Industry-Leader With It

It looks like M&A is back. DISH Network Corp (NASDAQ:DISH) announced on Monday a large bid for Sprint Nextel Corporation (NYSE:S), with which it is looking to become the biggest player in video, broadband and voice services. Reportedly, the merger would provide great value for shareholders of both companies, and huge synergy-related benefits. In any case, the offer looks substantially better than a previous bid from Softbank, and seems to have a good chance of success.

Terms of the Deal

DISH Network Corp (NASDAQ:DISH) has offered to pay around $25.5 billion for Sprint Nextel Corporation (NYSE:S), offering $4.76 in cash and 0.05953 shares of DISH Network Corp (NASDAQ:DISH) stock per Sprint Nextel Corporation (NYSE:S) share. The bid represents a premium of roughly 12% to the Friday closing price of Sprint Nextel Corporation (NYSE:S), but following the news, Sprint Nextel Corporation (NYSE:S)’s stock price quickly caught up to the $7.00 at which the DISH Network Corp (NASDAQ:DISH) deal values the company. Previously, Sprint Nextel Corporation (NYSE:S) had agreed to sell a 70% stake in the company to Japan’s Softbank Corp for around $20 billion.

According to DISH Network Corp (NASDAQ:DISH) management, the deal is set to unlock significant value for shareholders through an enhanced strategic position for the combined companies, and synergy-related benefits currently estimated at around $37 billion. In other words, the merger of the two companies would solidify the position of both; their products and services complement each other, and they can achieve considerable savings through enhanced economies of scale.

DISH Network Corp (NASDAQ:DISH) says the deal is clearly superior to Softbank’s bid, not only because of the combined strength of the companies, but also because of the higher price with a larger cash percentage.

The deal would reportedly result in an industry-leading spectrum portfolio, and would allow the coporation to provide a seamlessly integrated home and mobile bundle of video, broadband, and voice services. According to DISH Networks’ chairman Charles Ergen, the deal could upon completion propel the merged companies to a position of national industry leadership. The deal will be funded by $8.2 billion of DISH’s own balance sheet, with the rest covered by debt financing.