You’ve likely heard by now that the quests to acquire Clearwire Corporation (NASDAQ:CLWR)’s spectrum still seem to be operating on the premise of by-any-means-necessary. SoftBank and Sprint Nextel Corporation (NYSE:S) on Monday said the two had agreed on SoftBank raising its bid for Sprint Nextel Corporation (NYSE:S) to $21.6 billion.
The problem is that the increase is still shy of DISH Network Corp (NASDAQ:DISH)’s $25.5 billion offer, leaving the door open for Sprint shareholders to vote down SoftBank’s offer.
The maneuvering among the heads of these heavyweights reminded me of a term I came across on Investopedia.com. Called the Godfather offer, I think it perfectly sums up the situation involving the back and forth bidding saga now known as SoftBank/Sprint/Clearwire Corporation (NASDAQ:CLWR)/DISH Network Corp (NASDAQ:DISH). If you are familiar with Francis Ford Coppola’s trilogy of Godfather movies, you may see the parallels between these movies and the CEOs at play in this four-way saga. Those CEOs are Dish’s Charlie Ergen, SoftBank’s Masayoshi Son, and to a lesser extent, Sprint’s Daniel Hesse.
A “godfather offer” is an irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price’s premium is extremely generous compared to the prevailing market price. Therefore, if the target company’s management refuses the offer, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing their fiduciary duty of looking out for the best interests of the shareholders. (Investopedia.com)
Since December, this four-way saga has been intensifying. SoftBank and Sprint were all set to move forward with an agreement that would have allowed the Japanese-based company to buy a 70% stake in Sprint. The deal’s terms included Sprint buying the remaining roughly 49% of Clearwire Corporation (NASDAQ:CLWR).
But then, seemingly out of left field came Ergen with an offer for Clearwire Corporation (NASDAQ:CLWR) that trumped Sprint’s. Sprint’s per share offer was originally $2.97, while Dish’s was $3.30.
When Clearwire Corporation (NASDAQ:CLWR) shareholders learned how much more Ergen was willing to pay for their shares, they naturally screamed. Many of them thought Sprint’s offer was too low in the first place and Ergen’s higher bid solidified their notions. Clearwire Corporation (NASDAQ:CLWR) shareholders splintered over which offer to accept, and began hurling lawsuit threats at their board.
The Godfather Offers
All of this noise contributed to Ergen likely realizing he would be hard-pressed in actually getting a significant stake in Clearwire considering Sprint owns most of it. So, he simplified his hurdle-jumping in getting access Clearwire by bidding to just buy Sprint. He offered $25.5 billion.