Clearwire Deal Is a Lesson in High-Stakes Bidding

The bidding for Clearwire shows that takeovers are sometimes just a poker game, albeit with billions in the pot. Depending upon how well the directors play and when they decide to fold or up the ante, shareholders can be up or down billions of dollars.

This game began with Sprint Nextel holding most of the cards. Sprint controls over 50 percent of Clearwire and in December, Sprint and Clearwire announced an agreement for Sprint to acquire the remainder for $2.97 a share. Sprint agreed to pay a 128 percent premium, but shareholders still protested that Sprint was underpaying. This is a common complaint in so-called going-private transactions, where the controlling shareholder can use its power to push through a cheap buyout. But there is now a well-worn set of procedures aimed at preventing this, procedures that Clearwire’s board followed. A special committee of independent directors was set up to run the negotiations. Clearwire also conditioned the deal so that its shareholders other than the Sprint group had to approve it.