Sprint sues Dish, Clearwire over takeover plan

Dish's proposal would violate Clearwire's shareholder agreement, Sprint says

Sprint Nextel sued Clearwire and Dish Network on Monday in a bid to block Dish from taking over Clearwire, Sprint's majority-owned network partner.

Dish and Sprint have been in a bidding war over Clearwire, which Sprint also plans to buy, and last week Clearwire's board recommended shareholders accept Dish's offer. But in a complaint filed in the Delaware Court of Chancery on Monday, Sprint said Dish's proposal violates its rights and those of other strategic investors. In its suit, Sprint wants to prevent the deal from being consummated and seeks unspecified damages.

Sprint co-founded Clearwire along with several strategic partners in 2008 to build out a WiMax network to carry its first 4G service. It still owns a majority of Clearwire's stock and is seeking to buy out the rest of the company in order to build a strong LTE network to take on its larger rivals. Because of Clearwire's massive spectrum holdings, the fate of that company is expected to play a key role in the complicated takeover battle among Dish, SoftBank and Sprint. A lawsuit over Dish's Clearwire bid had been widely expected.

Dish is also seeking to buy out Clearwire, but in its last bid the satellite TV and Internet provider said it would be willing to buy a minority stake as long as it got certain rights, such as being able to name three board members and approve material transactions with third parties.

Dish's offer violates Clearwire's charter and the Equity Holder's Agreement that outlines the rights of Sprint and other strategic shareholders, Sprint said. The offer couldn't be completed without approval by the holders of at least 75 percent of Clearwire's voting stock, nor without the approval of Comcast, one of the company's strategic investors, Sprint said. "Completion of the tender offer without such approvals is unlawful," Sprint said in a press release.

"Dish has repeatedly attempted to fool Clearwire's shareholders into believing its proposal was actionable in an effort to acquire Clearwire's spectrum and to obstruct Sprint's transaction with Clearwire," Sprint said.

Sprint offered to buy out Clearwire for US$2.90 per share last year after its board agreed to a $20.1 billion merger with Japanese carrier SoftBank. Dish offered to buy Clearwire in January, setting off a bidding war that has brought Dish's offer to $4.40 per share. Dish is also bidding against SoftBank to buy Sprint for $25.5 billion.

"We are reviewing the complaint and considering our options," Dish spokesman Bob Toevs said in an email message on Monday. Clearwire declined to comment on the suit.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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