Softbank Buys Out 70% Of Sprint For $20 Billion


| October 15, 2012 - 7:30 pm

(From Yuri Kageyama of The Associated Press, via Yahoo! Finance) Softbank Corp. has reached a deal to buy 70 percent of U.S. mobile carrier Sprint Nextel Corp. for $20.1 billion—the largest ever foreign acquisition by a Japanese company.

The agreement, announced Monday at a joint news conference in Tokyo by Softbank President Masayoshi Son and Sprint Chief Executive Dan Hesse, will bring together the third biggest mobile carriers of both Japan and the U.S., underlining the growth ambitions of Softbank, which has made a series of acquisitions over the last couple of decades.

It also shows how the strong yen, which is usually seen as a negative for export-reliant Japan Inc., has boosted the overseas purchasing power of Japanese corporations as a stagnant domestic market pushes them to look abroad for growth. The Sprint buy pushes Japan’s overseas acquisitions so far this year, including debt of the acquired companies, to over $100 billion, nearly double the same period last year, according to deal tracking company Dealogic.

The deal was given a green light by the boards of both companies. It still needs approval from Sprint shareholders and U.S. regulators. Softbank said the transaction is expected to be completed by the middle of next year.

The combination of Softbank and Sprint will tie with AT&T for world’s No. 3 mobile company by revenue after China Mobile and Verizon, according to Softbank.

Son said the investment made sense because the U.S. is the world’s biggest market in smartphones, and it was still growing.

The news of the deal, which leaked late last week, had spooked investors worried about such a big investment and sent Softbank shares lower by about a third in recent sessions. Standard & Poor’s had placed Softbank on “credit watch negative,” meaning its credit rating could be downgraded. Shares of Sprint shot up in anticipation of the offer.

Sprint has struggled in recent years to compete with Verizon and AT&T. The company has $21 billion in long-term debt, and has launched a costly network restructuring and signed a long-term contract to buy $15.5 billion worth of iPhones from Apple Inc. over four years.

Under the agreement with Sprint, $12.1 billion will go to Sprint shareholders and $8 billion will be fresh capital, which will serve to strengthen Sprint’s balance sheet and networks, Son said. Softbank is offering $7.30 a share for the existing shares, about 27 percent above Friday’s closing price of $5.73.

“This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward,” Hesse said.

By joining forces, Sprint and Softbank will become one of the top world smartphone providers, gaining greater bargaining power with the manufacturers of the gadgets and network equipment suppliers.