(Reuters) - Clearwire Corp CLWR.O shareholder Mount Kellett Capital Management LP said on Friday that Sprint Nextel Corp's (S.N) $2.90-per-share offer "grossly" undervalues the wireless service provider.
In an open letter the day after Sprint announced its $2.1 billion bid, Mount Kellett, which owns 3.6 percent of Clearwire's stock, urged the Clearwire board not to accept it.
Sprint, which already owns 50.45 percent of Clearwire, needs approval from a majority of Clearwire's minority shareholders, or owners of 24.8 percent of Clearwire shares, for the deal.
Mount Kellett also said Sprint's offer of $800 million of interim financing for cash-strapped Clearwire is a "threat to minority stockholders" because the debt would be convertible to shares, which would dilute the value of existing shareholders' stakes.
"Allowing minority rights to thus be effectively stripped would, in our view, be a serious breach of the board's fiduciary duty to stockholders," Mount Kellett said.
It also complained that the Sprint-Clearwire merger agreement was contingent on the completion of Softbank Corp's (9984.T) plan to buy 70 percent of Sprint. It said this subjected Clearwire to "unnecessary deal risks."
"If Sprint so wants to buy the company, it should put a fair proposal on the table when it is in fact able to consummate it," it said.
Mount Kellett said in the letter, "There is no rush for the company to sell itself at a deeply discounted price."
Clearwire shares rose almost 15 percent on Thursday to $3.16 after the offer was announced, as investors bet that Sprint would end up raising its bid. Several investors said the $2.90-per-share bid was too low.
The shares fell 1 percent on Friday to $3.12 after Reuters reported that Softbank had put a cap on how much Sprint could offer Clearwire - $2.97 per share.
"What we're telling customers is take profits over $3," said D.A. Davidson & Co analyst Donna Jaegers.
Jaegers estimated that Clearwire's spectrum is worth about $3.88 a share but cited the risk that Sprint will not increase its bid if Softbank insists on the bidding cap.
(Reporting By Sinead Carew; Editing by Gerald E. McCormick and John Wallace)