Wall Street took a step back from Sprint Nextel Corp. Wednesday morning
after potential acquirer Dish Network Corp. backed off.
Sprint shares were down 3.1 percent, a drop of 23 cents to $7.09, and one analyst downgraded the stock.
Dish failed to meet an 11 p. m. deadline Tuesday to submit its "best and final offer" for Sprint and blamed the target for putting up barriers to a fresh offer. Sprint had rejected its April buyout proposal of $25.5 billion on the grounds it wasn't an offer on which Sprint could take action.
An exit by Dish would eliminate the principal obstacle to Tokyo-based SoftBank Corp.'s deal to acquire 78 percent of Sprint for $21.6 billion. Sprint shareholders are set to vote on that proposal Tuesday.
Wednesday morning, Analyst Kevin Smithen at Macquarie Equities Research reduced his buy rating on Sprint shares to a neutral rating.
"After a strong and exciting run over the past 20 months, we are recommending that investors take profit in Sprint (shares) as attention shifts from M&A (the buyout battle) back to fundamentals," Smithen wrote in a note to clients.
By fundamentals, he means Sprint and SoftBank's coming battle to compete more effectively against Verizon, AT&T and T-Mobile. Smithen also said Sprint's unsettled battle to acquire its wireless network partner Clearwire Corp. clouds the horizon for Sprint shares.
Smithen and Wells Fargo Securities analyst Jennifer Fritzsche both said Dish's decision not to bid makes SoftBank's deal likely to succeed.
Dish hasn't left the battle completely. The company's statement said it continues to weigh its options regarding Sprint.
It has shifted its focus to an offer to buy shares of Clearwire directly from investors for $4.40 a share in what Wall Street calls a tender offer. Its offer will stand only if Dish gains at least 25 percent of Clearwire's shares.
The tender offer is higher than Sprint's proposal to buy the roughly 49 percent of Clearwire it doesn't already own for $3.40 a share. Clearwire investors are set to vote on Sprint's offer Monday, though Clearwire has advised its shareholders to vote no and take up Dish's offer.
Sprint sued both companies seeking a court order to halt the tender offer and declare it illegal.
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