Softbank Corp. agreed to buy a stake of about 70 percent in Sprint Nextel Corp. for $20.1 billion as Japan’s third-biggest mobile-phone operator seeks growth overseas amid a declining local market.
Softbank will pay $12.1 billion to Sprint shareholders and the deal includes $8 billion of new capital, according to a statement today. The deal would be the biggest publicly announced outbound acquisition by a Japanese company since at least 2000, according to data compiled by Bloomberg.
Entering the U.S. allows billionaire Masayoshi Son, Softbank’s president, to participate in a market that’s still growing in contrast to Japan, where handset shipments tumbled 27 percent during the past five years. Sprint can fund a faster expansion of its 4G wireless network, pay down debt or make more acquisitions aimed at challenging bigger competitors Verizon Wireless and AT&T Inc.
“It’s not an easy path to go,” said Son, speaking at a press conference in Tokyo. “But without taking on a challenge, we may end up facing bigger risks.”
Softbank is creating U.S. holding entities to make the acquisition. About 55 percent of Sprint shares will get $7.30 in cash, and the rest will convert into 30 percent of a newly capitalized company, which will include the $8 billion cash infusion, Sprint said in a presentation to investors. SoftBank will also receive a warrant to purchase 55 million additional Sprint shares at an exercise price of $5.25 per share.
No Better Time
“It could not be a better time to get this investment of capital,” Sprint Chief Executive Officer Dan Hesse said during a press conference in Tokyo.
Sprint, based in Overland Park, Kansas, fell 0.7 percent to $5.69 at the close in New York. AT&T, based in Dallas, declined 1.2 percent to $35.21, while Verizon dropped 0.3 percent.
Son is pursuing an acquisition strategy that counts on smartphone users migrating to faster wireless networks to surf the Web and download videos and music. Softbank is looking to ride the fastest growth in mobile communications since 3G started rolling out a decade ago.
LTE subscriptions quadrupled this year to 73 million and are expected to reach 1.2 billion by 2016, according to projections from IHS iSuppli. Some of the world’s largest handset makers -- Apple, Samsung Electronics Co. and HTC Corp. - - support the technology.
Softbank shares fell 5.3 percent to 2,268 yen in Tokyo today, extending the record 17 percent plunge on Oct. 12. Son controls 20.92 percent of the mobile-phone operator, which was the first to offer Apple Inc.’s iPhone in Japan.