Softbank nears $20bn deal to buy Sprint stake
Tokyo, October 15, 2012
Japanese mobile operator Softbank Corp will announce later on Monday a deal to acquire control of US carrier Sprint Nextel Corp, a source familiar with the matter said, with the likely $20 billion price tag the most any Japanese firm has paid for an overseas takeover.
The deal, to be announced at a news conference at 0800 GMT, would give Sprint ammunition to potentially acquire peers and build out its 4G network to compete better in a US wireless market dominated by AT&T and Verizon.
Shares in Softbank - whose billionaire founder and CEO Masayoshi Son is known for his risky bets - tumbled as much as 8.1 percent on Monday, and have lost more than a fifth of their value since news first broke of the firm's interest in Sprint. Investors are concerned that Son may be offering too much to enter the US telecommunications market.
Under the deal taking shape, Softbank would buy $3 billion of bonds convertible into Sprint stock at $5.25 a share, the Wall Street Journal reported, citing people familiar with the matter. It would also buy $5 billion in stock directly from Sprint, and offer $7.30 a share for stock it buys in the public markets. Sprint shares closed on Friday at $5.73.
Sprint, led by CEO Dan Hesse, has net debt of about $15 billion, while Softbank has net debt of about $10 billion. Adding the $2 billion of net debt of eAccess Ltd, which Softbank recently agreed to buy, would raise "post-deal gearing levels to unacceptable heights", Societe Generale said in a client note on Friday.
Four banks approved loans totalling 1.65 trillion yen ($21.1 billion) to Softbank, three sources with direct knowledge of the matter told Reuters on Monday. Mizuho Financial Group Inc , Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Deutsche Bank submitted a commitment letter to Softbank promising the loans on Monday.
"It's the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.
Softbank acquired Vodafone's Japan unit for $15.5 billion in a landmark deal in 2006 that propelled the firm into the mobile carrier business.
"Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realise he's making the right decision down the road," said Nakanishi. - Reuters