Delaware law and Equity Holders Agreement both stand in the way of Dish's bid for Clearwire, claims Sprint
While it has publicly voiced its opposition to Dish's attempt to purchase a large portion of Clearwire, Sprint is taking things to the next level today by filing a lawsuit against the two companies to stop the deal once and for all. In a release put out to its official newsroom, Sprint details the fact that it has filed a complaint in Delaware against the two companies, citing that if the deal were to go through it would violate not only Delaware law but also Clearwire's Equity Holders Agreement (EHA).
The current deal, which could see Dish purchasing up to the 49.5-percent of Clearwire that Sprint doesn't already own, violates several different principles in Sprint's view.
First in the way are the EHA and Charter of Clearwire, which stipulate that in order for Dish to acquire such a stake in Clearwire it would require approval by 75-percent of Clearwire's shareholders as well as approval from Comcast, neither of which have the companies obtained. Additionally, Dish's request for governance in the company to the tune of multiple board member seats would also be unobtainable, as Delaware law requires a certain board structure for fundamental corporate events. Also pertaining to board appointments are the EHA and Charter again, which allow Sprint to hold a minimum of 7 board seats -- along with committees electing several more -- directly conflicting with the number of seats Dish is requiring as part of its deal.
In the end, Sprint has a solid set of points that it believes should keep Clearwire from even considering accepting Dish's proposal, and is asking for the Delaware Court of Chancery to enforce both Clearwire's Charter and EHA and block the offer. Sprint believes that if the deal is allowed to continue, it will negatively affect shareholders by locking the company up in a deal that legally cannot be finalized. While these structural issues have been apparent (at least to Sprint) from the beginning, it doesn't seem to be stopping Dish nor Clearwire from wanting to go through with it. We'll be looking forward to the companies' official responses to this lawsuit.