Dish to buy Sprint for $25.5 billion, offers 13 percent premium to SoftBank’s $20 billion

Telecom Lead America: Dish Network, the # 2 U.S. satellite television provider, has offered to buy Sprint Nextel for $25.5 billion, 13 percent higher than SoftBank’s $20 billion earlier offer.

Dish was already in the midst of an unsolicited offer for Clearwire Corp, the wireless company majority owned by Sprint.

READ WSJ report on telecom M&A in the U.S. market HERE

If Dish is successful in the bid, Sprint shareholders would own 32 percent of the combined company. It will be a huge setback for Japanese company.

Sprint, the # 3 U.S. mobile services provider, agreed in October to sell 70 percent shares to SoftBank for $20 billion.

“Though not a condition of our proposal, we anticipate that the pending transaction with Clearwire would be completed,” said Dish Chairman Charlie Ergen.

Barclays is serving as financial adviser to Dish. The satellite company will fund the bid with $8.2 billion in cash from its balance sheet as well as debt financing.

Russian telecom market also experienced a similar M&A round recently. Mobile TeleSystems (MTS) and VimpelCom of Russia have expressed their interest to buy Tele2 Russia from Tele2 for around $4.25 billion, including $1.15 billion of net debt. The offer represented a premium of around 30 percent for Tele2 AB and its shareholders compared to the offer by VTB Capital. But the offer was later rejected by Tele2 AB.

Dish is likely to become the successful bidder since the cash portion of Dish’s bid proposal represents 18 percent premium over the $4.03 per share implied by the SoftBank proposal, and the equity portion represents approximately 32 percent ownership in the combined Dish/Sprint versus SoftBank’s proposal of a 30 percent interest in Sprint alone. Together this represents a 13 percent premium to the value of the existing SoftBank proposal.

Ergen said: “A 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.

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