Dish Network Chairman Charlie Ergen’s recent $25.5 billion bid for Sprint is being followed up with work trying to convince the shareholders of Sprint that his company would make a better home for the wireless provider than Japan’s SoftBank. Last week, he turned his attention to his own shareholders, fielding questions at Dish’s annual meeting at its Englewood, CO HQ.
Asked by one analyst what Dish’s options are if Sprint rejects its overtures, Ergen’s answer was confident: “We’re not going to lose because we’ve got a better offer on the table. Our offer is $7.10 a share. Softbank’s offer is $6.38 a share. Now, if Softbank were to raise their offer to $7.11, then it’s a fair fight. It’s simply a bidding war of two companies. Ultimately, the shareholders of Sprint are going to take the person who has the most money, and secondarily who has the best strategic plan going forward,” a Forbes article quoted him as saying.
However, SoftBank says a merged Dish-Sprint entity would be dangerously overleveraged.
Ergen acknowledged that Dish would need to take on $50 billion in leverage to fund the deal, vs. Softbank’s $25 billion, “except we’d have twice as much EBITDA.” And Dish’s annual cash flow of $1.5 billion would allow it to de-lever faster. “So we win on financial stability for those investors who take the time to do their homework,” Forbes reported him as saying.
Ergen also got personal, suggesting that Son, who spent a record $117 million in January to buy a part-time home in Silicon Valley, wouldn’t be as careful a steward of Sprint shareholders’ value as he would: “How do you have a $117 million home you live in for a week a year?” That works out to, what, a billion dollars a month?” Suggesting that his own home is worth about $1 million, he said, “We’re going to take that [$116 million] and we’re going to build some towers, hire some engineers, charge you $10 less for your phone. If you want to win, you’ve got to be all in,” Forbes noted in the article.
Dish is also in the midst of an unsolicited offer for Clearwire Corp, the wireless company majority-owned by Sprint. Ergen has not formally withdrawn Dish’s $3.30 per share offer for Clearwire, but would be willing to honor Sprint’s existing agreement to buy Clearwire for $2.97 per share.
RBR-TVBR observation: We think Ergen will get his Sprint. Why? Not only because of the higher offer, but also his strategic plans for the company as it relates to Dish: “We know that people want video and to be able to look at it anywhere they are. We’re combining the third-largest mobile operator and the third-largest pay-TV service. It gives us the chance to become number two or maybe number one,” he said in April.