DISH Network proposes merger with Sprint Nextel for $25.5 billion

DISH Network Corporation today announced that it has submitted a merger proposal to the Board of Directors of Sprint Nextel Corporation for a total cash and stock consideration of $25.5 billion. The DISH proposal clearly represents superior value to Sprint shareholders, including greater ownership in a combined company that is better positioned for the future with more spectrum, products, subscribers, financial scale and new opportunities.

DISH is offering Sprint shareholders a total consideration of $25.5 billion, consisting of $17.3 billion in cash and $8.2 billion in stock. Sprint shareholders would receive $7.00 per share, based upon DISH’s closing price on Friday, April 12, 2013. This consists of $4.76 per share in cash and 0.05953 DISH shares per Sprint share. The cash portion of DISH’s proposal represents an 18% premium over the $4.03 per share implied by the SoftBank proposal, and the equity portion represents approximately 32% ownership in the combined DISH/Sprint versus SoftBank’s proposal of a 30% interest in Sprint alone. Together this represents a 13% premium to the value of the existing SoftBank proposal.

“The DISH proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal,” said Charlie Ergen, Chairman of DISH Network, in the press release. “Sprint shareholders will benefit from a higher price with more cash while also creating the opportunity to participate more meaningfully in a combined DISH/Sprint with a significantly-enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal.”

Mr. Ergen continued, “A transformative DISH/Sprint merger will create the only company that can offer customers a convenient, fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services. Additionally, the combined national footprints and scale will allow DISH/Sprint to bring improved broadband services to millions of homes with inferior or no access to competitive broadband services. This unique, combined company will have a leadership position in video, data and voice and the necessary broadband spectrum to provide customers with rich content everywhere, all the time.”

The proposed combination will result in synergies and growth opportunities estimated at $37 billion in net present value, including an estimated $11 billion in cost savings.

DISH has provided additional information regarding the proposed merger via a dedicated transaction microsite that can be accessed at www.CompleteDishSolution.com.

Barclays is acting as financial advisor to DISH.

Following is text of the letter that DISH sent to Sprint Nextel Corp. Board of Directors on April 15, 2013.

Board of Directors
Sprint Nextel Corporation
6200 Sprint Parkway
Overland Park, KS 66251
Attn: James H. Hance, Jr., Chairman of the Board

Dear Jim:

On behalf of DISH Network Corporation (“DISH”), I am submitting this proposal for a merger between DISH and Sprint Nextel Corporation (“Sprint”). Our proposal provides Sprint shareholders with a superior alternative to the pending SoftBank Corporation (“SoftBank”) proposal. It provides more cash and affords your shareholders the opportunity to participate more meaningfully in a combined DISH/Sprint, which will benefit from a significantly enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal.

We are offering Sprint shareholders a total consideration of $25.5 billion, consisting of $17.3 billion in cash and $8.2 billion in stock. Sprint shareholders would receive $7.00 per share, based upon DISH’s closing price on Friday, April 12, 2013. This consists of $4.76 per share in cash and 0.05953 DISH shares per Sprint share. The cash portion of our proposal represents an 18% premium over the $4.03 per share implied by the SoftBank proposal, and the equity portion represents approximately 32% ownership in the combined DISH/Sprint versus SoftBank’s proposal of a 30% interest in Sprint alone. Together this represents a 13% premium to the value of the existing SoftBank proposal.

Our proposal provides a highly-compelling and unique opportunity for Sprint shareholders. We are offering an ownership interest in a combined company with a comprehensive product and services suite, a significantly enhanced subscriber base, considerable financial and operating scale, as well as a spectrum portfolio that would lead the industry. As a result, this merger creates sizable cost and CAPEX savings and promises extensive new revenue opportunities.

Leveraging both companies’ existing assets and expertise, we will be the only company able to offer a fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services to meet rapidly evolving customer preferences. The new company’s assets will immediately establish national cross-platform leadership and will position the company to deliver innovative services while expanding our collective subscriber base.

The proposed combination will result in synergies and growth opportunities estimated at $37 billion in net present value. This includes an estimated $11 billion in cost savings, representing approximately $1.8 billion in annual run-rate cost synergies by the third year after closing.

Further, our combined national footprints and scale will allow us to efficiently develop our joint spectrum assets to provide advanced services to the millions of homes with inferior or no access to competitive broadband services.

I am proud of the company we have built and believe we will be an excellent partner to Sprint. Like Sprint, DISH possesses a strong tradition of innovation and industry leadership. We created the third largest pay-TV provider while competing with incumbent cable monopolies and other entrenched operators. DISH has consistently led our industry in service and technology delivery with award-winning innovations like Hopper® with Sling®. Our history of value creation is outstanding. Investors in our 1995 initial public offering have enjoyed a total return of 27 times their original investment, significantly outperforming the broader markets and our peers. We also have a proven track record of responsible capital management.

DISH has significant experience structuring and consummating strategic transactions and only needs to complete confirmatory due diligence, which we believe can be done quickly with your cooperation. We have examined your merger agreement with SoftBank and we would be prepared to execute a definitive merger agreement on substantially similar terms and conditions. Though not a condition of our proposal, we anticipate that the pending transaction with Clearwire would be completed. We are confident that we can obtain all necessary approvals within a reasonable timeframe.

We intend to fund the $17.3 billion cash portion of the transaction using $8.2 billion of our balance sheet cash and additional debt financing. We have a proven track record in raising capital to fund strategic initiatives and have received a Highly Confident Letter from our financial advisor, Barclays, confirming our ability to raise the required financing.

We would be pleased to discuss our plans for the combined company and we are available at any time to meet with the Sprint Board, management and advisors to answer any questions about our proposed merger. We are confident that the Sprint Board will share our view that this proposed merger offers an excellent opportunity for the equity holders of Sprint to realize a superior value for their shares that is unavailable to them under the SoftBank proposal.

While it would have been our preference to have confidential discussions regarding this proposed merger, your existing agreement with SoftBank and the impending deadlines associated with your shareholder vote, will compel us to confirm our intentions publicly. We look forward to hearing from you.

Very Truly Yours,

DISH Network Corporation

Charlie Ergen
Chairman

DISH Network Corporation (NASDAQ: DISH), through its subsidiary DISH Network L.L.C., provides approximately 14.056 million satellite TV customers, as of Dec. 31, 2012, with the highest quality programming and technology with the most choices at the best value, including HD Free for Life. Subscribers enjoy the largest high definition line-up with more than 200 national HD channels, the most international channels, and award-winning HD and DVR technology. DISH Network Corporation is a Fortune 200 company.

Source: DISH Network Corporation

13 Comments

      1. Certainly the digital delivery devices are already in place. As evidenced by SJ comments about cracking the code Apple labs have been busy designing and testing iTV prototypes for years.

        The big elephant in the room — content contracts continue to remain elusive.

        The a la carte iTunes song model applicable to cable channels would be welcome the world over.

        Let’s move on …

  1. Why MDN, did you publish the whole article on this item? On other more important, more interesting articles you truncate / abridge & provide a link. A link on this article would have been sufficient. -R

  2. This is very good news indeed!

    For those that don’t know, here’s a quick history and why this is so important to you and why this merger has nothing to do with Dish merging with Sprint, and everything to do with both companies fighting over who gets to own and control Clear.

    Clear was the first 4G network via WiMax. Sprint owns 51% of Clear. Over the past several years Sprint owned none of the 4G WiMax towers they used in their phones and licensed all of their 4G WiMax spectrum from Clear which makes it very easy for Sprint to drop WiMax and switch to LTE today.

    Clear also owns tons of spectrum that Sprint needs to finish building out their 4G LTE network, and in some areas, Sprint still has to license bandwidth from Clear because they don’t own enough spectrum to finish their LTE buildout without Clear.

    In the meantime, Clear is the ONLY company offering unlimited 4G Hotspot to consumers for only $50 per month if you’re lucky enough to live near one of their towers. With Clear, you can cut the cord and get all of your internet and TV (via NetFlix, Hulu, etc) over the internet for one low price, and take your Hotspot with you as a bonus! The problem is, Clear is flat out broke and can’t build any new towers nor expand unless somebody buys them.

    Here is where the Dish and Sprint battle comes in. Sprint offered to buy Clear to pick up their spectrum for their Cell service and no doubt will discontinue the unlimited Hotspot option which will set us “chord cutters” back for many years.

    Dish on the other hand offered to buy Clear because Dish has TV, but they have no internet offering. The Clear spectrum will give Dish that “last mile” to your home without having to wire up a city for Internet causing serious competition to the Cable companies!

    The problem is Sprint owns 51% of Clear which means they have the majority vote on the board of directors of Clear and can decide to sell Clear to themselves and ignore the Dish offer. Of course the minority shareholders of Clear are threatening to sue Sprint for not accepting the higher offer from Dish which is in the best interest of the shareholders – ya-di-ya-da. So now we have a bit of a Stale mate over who gets to own Clear.

    So now it seems that Dish is doing an end run around Sprint by offering to buy the entire company. With this deal, Dish not only picks up vast amounts of Spectrum from Clear, and can offer unlimited 4G home internet and compete with Cable, but they also get a Cell phone company too!

    It’s a brilliant move, but this merger really started with the two companies fighting over who gets to own Clear. Clear is that important to both companies.

    If Dish succeeds in buying Sprint, the age of unlimited hotspot will be upon us since it will be the technique Dish uses to provide Cable TV to rural areas without all the wires, and it will force the other Cell phone companies to offer similar unlimited data plans as well.

    If this deal goes through, this will be the beginning of the end of Cable company monopolies, and the beginning of the end of capped data plans on your phone.

    I think this is a really important development that will affect us all, and is something that MacDailyNews and all of us should follow carefully. This is big news that will directly affect the future of the internet AND the cellular companies AND the cable industry all at once.

    With this deal, BIG changes will be coming, and these are changes for the better.

      1. Believe me, I am worried too, but what is the alternative? Sprint buying Clear gobbling up their spectrum and spitting out the unlimited hotspot like yesterday’s news?

        –or Dish succeeding in buying Clear and then we can buy unlimited hotspot from Dish and our cell service from Sprint. Carry two devices? Dish and Clear will just become yet another “cable company”, leaving no incentive for any of the phone companies to offer unlimited data plans since nobody else is doing it.

        I am usually skeptical of big mergers too and I am sure they are not doing this for our benefit, but the forces are all aligned where the survival of both companies could be at stake which is forcing this “unholy” alliance which in turn might “accidentally” benefit all of us for change.

        Either way, this will definitely be an interesting development to watch as it unfolds!

    1. I had hoped that Apple would buy Sprint/Clear and be able to bypass the dumb pipe companies via Clear’s 4G wireless network. They have the money to build it out. I think this is a major missed opportunity for Apple.

      As for content, Apple needs to just buy Disney. The crown jewel in that deal would be ESPN. Imagine being able to receive all ABC/ESPN/Disney content through iTunes. Apple could easily have bought Sprint/Clear outright for cash, and gained a controlling interest in Disney without seriously depleting cash reserves, much less borrowing any money.

      1. I agree. Clear is the real gold-mine here and what everyone is fighting for. Why didn’t Apple buy them? Why didn’t Google? It’s crazy that it has taken this long for a fight to brew. Why isn’t this a 10 way shoot-out. Apple’s cash is causing them so much trouble, yet they let opportunities like this fly right by them.

        If the cable companies start putting internet data caps to block Apple from eating their lunch, Apple will regret the day they let Clear go. Imagine what Apple could do with all of Clear’s unused spectrum holdings !

        Maybe when it’s all done, Apple will buy Dish and get the whole shebang ! (but I wouldn’t hold my breath)

  3. Another possibility would be for Dish to offer internet service using Sprint/Clear for the uplink side and satellite for the downlink. The asymmetric pair would minimize the cell capacity for a given level of service, since most internet users receive much more data than they send. Go Charlie.

    1. The problem with Satellite is each satellite acts as a tower covering a HUGE area. Right now Satellite TV broadcasts the same signal to everybody at the same time. I am not sure what will happen if they started doing point-to-point communications. They may need more satellites. I am sure if they could do it, they wouldn’t be fighting over Clear in the first place, much less buying Sprint to get it.

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