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Clearwire Suit Ends Quietly As $3.6B Sprint Offer Takes Root

The hedge fund that has spent six months fighting Sprint Nextel Corp.'s takeover of Clearwire Corp. on Friday quietly dropped its legal battle, two days after Dish Network Corp. dropped out and cleared the way for Sprint's $3.6 billion deal.

Crest Financial Ltd. filed a motion in Delaware Chancery Court to dismiss the case, which has been pending since December and was moving toward a trial later this summer trial. Each party will bear its own costs and attorneys' fees and no settlement payments have been made, according to the filing.

Crest declined to comment on the filing, or on whether it planned to pursue a separate appraisal action, which would let a judge decide whether Sprint's sweetened $5-per-share offer is fair.

The news comes after rival bidder Dish Network Corp. gave up its pursuit of Clearwire on Wednesday, and after Sprint's own sale to Japan's SoftBank Corp. was approved by shareholders on Tuesday. Both developments left Crest, which owns about 8 percent of Clearwire's public shares, fewer options and fewer allies to fight a deal that now appears to be a fait accompli.

The only hurdle left for Sprint is a July 8 vote of Clearwire's stockholders. It has already publicly locked up the support of more than 30 percent of Clearwire's public shares and needs a simple majority to close the deal.

Crest first sued in December to block the transaction, in which Sprint aimed to acquire the half of Clearwire it didn't already own for $2.97 per share. Clearwire has had financial troubles for years, failing to pick up another wholesale customer and racking up more than than $3 billion in debt in the process.

But despite its balance sheet woes, Clearwire has a lot of spectrum, located at a bandwidth that is particularly useful for wireless network operators. Crest said Sprint was trying to acquire that spectrum on the cheap, and abusing its position as Clearwire's controlling stockholder to avoid paying market price.

Crest's arguments got a boost in January when Dish swooped in with a $3.30-per-share offer. Dish CEO Charlie Ergen has been itching to move his pay-TV business into the mobile market, and needed a partner to help build a network and put Dish's own spectrum to use.

Dish and Sprint traded higher offers over the next few months, with Crest egging them on. Verizon Wireless lobbed a $1.5 billion offer for some of Clearwire's standalone spectrum in early May, and the Texas-based hedge fund said that "the bidding war for Clearwire has just begun."

But it ended with a thud Wednesday, when Dish bowed out of the race after Sprint trumped its offer of $4.40 per share. The bidding war has raised the price by more than 68 percent and created an additional $1.5 billion in value over Sprint's original offer. But it's still well below the $13 per share Crest has said Clearwire could be worth.

Friday's announcement is surprising given the publicity Crest poured into its fight. It launched its own proxy solicitation, at a likely cost of hundreds of thousands of dollars, and hired big litigation guns in Quinn Emanuel Urquhart & Sullivan LLP's John Quinn, who last month joined a legal team that already included Vinson & Elkins LLP, Delaware specialists Seitz Ross Aronstam & Moritz LLP and Bancroft PLLC.

Quinn said in a May 7 statement that he expected a "very substantial" award for Clearwire's public shareholders, either through an appraisal of their shares or damages at trial. One of those options, a separate appraisal action in Delaware Chancery Court, is still on the table.

A spokesman for Clearwire declined to comment.

Crest was represented by John Quinn of Quinn Emanuel Urquhart & Sullivan LLP, Collins Seitz Jr., David Ross and Garrett Moritz of Seitz Ross Aronstam & Moritz LLP, Viet Dinh of Bancroft PLLC and Michael Holmes, Steve Gill, Kai Haakon Liekefett, Shaun Mathew and Benjamin Barron of Vinson & Elkins LLP.

Sprint was represented by Robert Saunders and Ronald Brown of Skadden Arps Slate Meagher & Flom LLP.

Clearwire was represented by Martin Lessner of Young Conaway Stargatt & Taylor LLP and Matthew Solum of Kirkland & Ellis LLP. The company's independent committee is represented by Rudolf Koch of Richards Layton & Finger PA and Joe McLaughlin of Simpson Thacher & Bartlett LLP.

Clearwire founder Craig McCaw was represented by Kenneth Nachbar of Morris Nichols Arsht & Tunnell LLP and by Friedman Kaplan Seiler & Adelman LLP.

The case was Crest Financial Ltd. v. Sprint Nextel Corp. et al., case number 8099, in the Delaware Court of Chancery.

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