Softbank to Acquire 70% Stake in Sprint Nextel for $20 Billion

Arthi Gupta
15 Oct, 2012
New York City

SoftBank agreed to acquire 70% stake in Sprint Nextel in a complex deal that will offer $8 billion investment in the company and $12.1 billion to current shareholders.

[R]10:00 AM New York – SoftBank agreed to acquire 70% stake in Sprint Nextel in a complex deal that will offer $8 billion investment in the company and $12.1 billion to current shareholders.[/R]

Softbank Corp., Japan''s third largest mobile carrier will acquire a 70% stake in telecom services provider Sprint Nextel for about $20.1 billion or approximately 1.57 trillion yen.

The transaction is expected to close by mid-2013.

As part of the deal, Softbank would pay around $12.1 billion to Sprint shareholders and invest another $8 billion of new capital for other purposes, including strengthening of Sprint''s balance sheet.

The acquisition of Sprint is the largest Japanese overseas acquisition following the $19 billion purchase of UK based Gallagher Group by Japan Tobacco Inc.

The deal is likely to face regulatory scrutiny but is expected to be approved quickly as it increases foreign investment in the telecom industry that is dominated by two companies, Verizon and AT&T.

In a complex deal, SoftBank will purchase newly issues shares from Sprint at $5.25 each and also acquire $3.1 billion in seven-year debt that will convert to Sprint stock at the same price. In addition, SoftBank will pay $12.1 billion or $7.30 a share, a premium to current shareholders.

The deal is not without risks especially SoftBank is still saddled with heavy debt load in Japan after the purchase of Vodafone PLC’s Japan unit.

SoftBank arranged a short term syndicated loan of 1.6 trillion or $20.4 billion from Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Mizuho Financial Group of Japan and from Deutsche Bank according to sources in Tokyo.

Sprint Nextel has struggled to integrate its two units after the purchase of Nextel and saw high churn and customer defection and has also fallen behind in implementing latest wireless network that processes more data suitable for video and Internet access.

The deal will provide the much needed capital to expand the network and attract new customers to compete in the world’s largest wireless market and analysts speculated that the company may make a run at T-Mobile which is in merger talks with MetroPCS.

After the deal, SoftBank is expected to have 90 million subscribers and will be one of the largest telecom carriers in the world.