Softbank agrees to buy Sprint stake in $20.1 billion deal

‘Big Challenge’

“Softbank has a very big challenge ahead of it,” said Mitsushige Akino, who oversees the equivalent of about $600 million in assets at Ichiyoshi Investment Management Co. in Tokyo, said today. “Investors need more explanation regarding their strategy for future growth.”

The deal will be funded by cash on hand and bridge financing. Softbank had $9.5 billion in cash and near cash items at the end of June, according to data compiled by Bloomberg. The company hired Mizuho Corporate Bank, Sumitomo Mitsui Banking, Bank of Tokyo-Mitsubishi UFJ and Deutsche Bank’s Tokyo branch as lead arrangers. Citigroup Inc., Rothschild and UBS AG advised Sprint.

Sprint must pay Softbank a termination fee of $600 million if it accepts a superior offer by another party. The U.S. carrier will also pay as much as $75 million of Softbank expenses if its shareholders reject the transaction.

World No. 3

The combined entity of Sprint and Softbank will create the world’s third-largest mobile-phone services provider by revenue, Son said. Softbank group will have 96 million users after the transaction, he said.

Sprint Chief Executive Officer Dan Hesse will retain the position after the deal. The boards of both companies have both approved the deal, which is expected to close by mid-2013, according to the statement.

“This could be the final and most important piece to reposition Sprint to compete effectively with AT&T and Verizon,” Walt Piecyk, an analyst with BTIG LLC in New York, said before the deal was announced.

Sprint bonds rose after the deal was announced. The $2.48 billion of 6.875 percent debt maturing in 2028 gained 4.5 cents to 106.25 cents on the dollar, yielding 6.25 percent at 3:31 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bonds earlier touched 108.25 cents, the highest since March 2006.

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