Analyst Says $2.90/Sh Just a 'Starting Point' for Sprint (S) in Clearwire (CLWR) Bidding
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Rating Summary:
2 Buy, 9 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Analysts at JPMorgan have weighed in on news this morning that Sprint (NYSE: S) offered to acquire the 48% of Clearwire (Nasdaq: CLWR) that it doesn't own for $2.90/share, and if the analyst is correct the fun has just begun.
JPMorgan's Sprint analyst Philip Cusick considers the $2.90 a "starting point" and the price "price could increase from here."
"We believe that $2.90 is in a reasonable price range for Clearwire. However, with a year of liquidity on the books and the alternative of raising additional equity or refinancing debt at this level, Clearwire is hardly without options, and we don't see why the company would necessarily jump at a the $2.90 bid. Thus there is likely some room to negotiate higher, and each additional $1/share is the equivalent of ~$700 million, or ~0.1x Sprint’s 2014 EBITDA.
Cusick notes that under the current shareholder agreement, with 25% of Clearwire shares outstanding, voting as a single group can block a transaction. The top 10 holders of Clearwire (excluding strategics) own 23% of Clearwire shares, he says.
The firm reiterated an Overweight rating on Sprint.
For an analyst ratings summary and ratings history on Sprint click here. For more ratings news on Sprint click here.
Shares of Sprint closed at $5.66 yesterday.
JPMorgan's Sprint analyst Philip Cusick considers the $2.90 a "starting point" and the price "price could increase from here."
"We believe that $2.90 is in a reasonable price range for Clearwire. However, with a year of liquidity on the books and the alternative of raising additional equity or refinancing debt at this level, Clearwire is hardly without options, and we don't see why the company would necessarily jump at a the $2.90 bid. Thus there is likely some room to negotiate higher, and each additional $1/share is the equivalent of ~$700 million, or ~0.1x Sprint’s 2014 EBITDA.
Cusick notes that under the current shareholder agreement, with 25% of Clearwire shares outstanding, voting as a single group can block a transaction. The top 10 holders of Clearwire (excluding strategics) own 23% of Clearwire shares, he says.
The firm reiterated an Overweight rating on Sprint.
For an analyst ratings summary and ratings history on Sprint click here. For more ratings news on Sprint click here.
Shares of Sprint closed at $5.66 yesterday.
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