The Houston firm, which holds 8.3% of Clearwire's stock, has sued to block the deal, and collect damages, alleging breach of fiduciary duty and other claims. On Thursday, Jan. 10, Judge Leo Strine will consider Crest's motion for an expedited trial in the Delaware Court of Chancery.
Crest general counsel Dave Schumacher outlined the firm's legal and regulatory maneuvers in a call with reporters on Jan 4.
Alongside its Delaware law suit, he said, Crest will ask the Federal Communications Commission to block the Clearwire deal, as well as Softbank Corp.'s pending acquisition of a 70% stake in Sprint.
Crest, which has held Clearwire stock since 2004, may be pursuing a risky strategy.
Sprint is offering $2.97 for a stock that has traded as low as 83 cents per share in the past year. If the firm succeeds, Clearwire stock could revisit its lows.
Schumacher said Sprint and Softbank launched a scheme to pick up Clearwire's vast tracts of wireless spectrum "on the cheap," using coercive tactics.
He cited $800 million in convertible debt financing that Sprint would provide Clearwire alongside the equity investment.
The financing is contingent upon shareholders accepting the equity deal.
The notes would convert to equity, Schumacher said, at $1.50 per share, about half the amount Sprint is offering for the minority shares. Clearwire shareholders would therefore face the "stark choice," he said, of selling out or holding onto a stock that would be diluted in a company with an encumbered balance sheet.
Clearwire declined to comment on the suit, which a Sprint spokesman called "baseless and without merit."
When discussing the deal in December, Clearwire CEO Erik Prusch maintained that Sprint's offer was the best option after years of exploring equity or spectrum sales.
A majority of Clearwire's minority investors must vote in favor of the transaction for the deal to close.
Even if Strine does not block the sale, Crest could gain a tactical advantage in the shareholder balloting.
Sprint has a head start, as Comcast Corp., Intel Corp. and Bright House Networks LLC have agreed to vote their 13% in favor of the sale. The companies were among a group that invested $3.2 billion in Clearwire in 2008, and have been part of a shareholder agreement with Sprint.
However, Crest argues that Comcast, Intel and Bright House should be considered affiliates of Sprint and not minority investors.
"If that 13% is affiliated with Sprint," Schumacher said, "Sprint and Clearwire will have a hard time obtaining the majority of the minority."
So what is Clearwire worth? Schumacher said Crest has not conducted its own valuation, but has relied on third-party analysts and others. He quoted a February 2012 presentation by Clearwire CFO Hope Cochran, who valued the company's spectrum at $11.7 billion to $35 billion value based on recent transactions.
It is true that spectrum is in demand. However, some of Clearwire's high-profile backers exited at lower prices than Sprint is currently offering. Google Inc. and Time Warner Cable Inc., which invested in the 2008 fundraising, sold at $2.26 and $1.37 per share, respectively, in 2012.
Crest has asked for a mid-April hearing. A date on the calendar would be progress.
Chris Shibutani joined Cowen Group Inc.'s equity research department as a managing director to cover biotechnology stocks. For other updates launch today's Movers & shakers slideshow.
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