A Wilmington, Delaware-based court on Friday ruled that Sprint heavily overpaid for Clearwire Corporation when it acquired the mobile service provider in 2013, clarifying that $5 per share that the telecom giant paid for the company is more than twice of its fair valuation. Vice Chancellor Travis Laster agreed with the now-defunct affiliate’s estimate, according to which the fair price of its stock at the time of their purchase amounted to $2.13 per share, thus marking a significant development in a case initially started by Aurelius Capital Management, a major shareholder of Clearwire that’s been trying to prove the company was severely undervalued by Sprint and its shareholders that approved the 2013 acquisition.
The hedge fund previously argued that $14.5 billion Sprint paid for Clearwire Corp wasn’t a fair valuation of the Bellevue, Washington-based wireless carrier, and filed for an appraisal action with a competent court in an effort to more than triple that valuation, pushing it to $16.08 per share and demanding $402 million for its 25 million shares. The judge dismissed that request, concluding that Sprint was already overpaying for the firm, largely due to a bidding war for the mobile service provider that the Overland Park, Kansas-based telecom giant led with Dish Network Corp at the time. Aurelius Capital Management’s affiliate that requested the judicial appraisal is now set to receive around $53 million plus interest as its compensation for the deal, though the ruling can still be appealed for a limited period. It’s currently unclear whether the hedge fund will do so, though the court’s decision is far from the ordinary, with this particular judicial body deeming most of the deals it appraises as being undervalued instead of overpriced, especially by such a significant margin.
The ruling is also unique in the sense that it saw the competent judge accept the valuation of one party and reject the estimate presented by the other, whereas similar cases usually end with the arbitrator finding some middle ground between the two. Regardless, Laster said that the price of the deal likely wouldn’t have been fair to minority investors if Sprint was the only suitor interested in acquiring the wireless carrier. Aurelius Capital Management has six months to appeal the decision.