Sprint Nextel, which is trying to buy out minority shareholders of affiliated wireless network operator Clearwire, said Monday that Dish Network's' counterbid contains illegal provisions.
Sprint said Dish's demand that it gets to designate three directors to Clearwire's board and the right to veto some corporate actions, like a sale, violate the laws of Delaware, where Clearwire is incorporated. They would wrest rights away from majority shareholder Sprint, which has no intention of giving them away, it said.
In the letter to Clearwire's board, Sprint, the country's third-largest cellphone carrier, also reiterated that it has no intention of approving a sale to Clearwire.
"Having invested billions of dollars in Clearwire, Sprint intends to enforce its legal and contractual rights, which are fundamental to investments it made," the Overland Park, Kan., company said.
Dish last week raised its offer for Clearwire Corp. to $4.40 per share in cash, valuing the company at $6.9 billion. Sprint Nextel Corp. had bid $3.40 per share for the half of the company it doesn't own.
Clearwire then said that it planned to talk to Englewood, Colo.-based Dish about the satellite TV operator's bid and delayed a shareholder vote on Sprint's offer.
Clearwire plans to reconvene the shareholders meeting on June 13.
A Dish representative did not immediately respond to a request for comment.
Crest Financial Ltd., an independent minority shareholder of Clearwire, said in a statement Monday that it still would like Clearwire to consider Dish's offer and to pursue an "open, competitive bidding process." Crest is requesting that Clearwire's board create a new special committee with new independent directors to help ensure "a fair and transparent" bidding process. Crest owns about 5 percent of Clearwire's outstanding Class A shares, according to FactSet.
Clearwire shares traded Monday afternoon at $4.42, just above Dish's offer. That suggests that investors see some chance of a sweetened offer from Sprint.
Sprint has accepted an offer from Softbank Corp. of Japan to sell 70 percent of itself for $20.1 billion. It's using the promise of that cash to fund its bid for Clearwire. However, Dish has offered to buy all of Sprint for $25.5 billion.
Softbank, Dish and Sprint all see value in combining Sprint with Clearwire, which has few customers but licenses to use vast swaths of radio spectrum for wireless broadband.