Softbank Corp. (9984), Japan’s third-largest mobile phone company, will pay about 180 billion yen ($2.3 billion) for smaller rival eAccess (9427) Ltd. to boost network capacity after it started selling Apple Inc. (AAPL)’s iPhone 5.
EAccess, which counts Goldman Sachs Group Inc. as its biggest shareholder, surged by its daily exchange-imposed limit of 4,000 yen, or 21 percent, to 23,000 yen as of today’s close in Tokyo, after gaining 26 percent yesterday. The deal valued EAccess shares at 52,000 yen each at yesterday’s closing prices.
Softbank is “not overpaying” for eAccess based on the value of its network infrastructure and subscribers, Softbank President Masayoshi Son told reporters in Tokyo yesterday. EAccess’s network for Long-Term Evolution data transmission can help Softbank maintain service levels as it signs on more smartphone subscribers that stream video and surf the Internet.
The premium Softbank is paying “is justified for an acquisition that brings with it bandwidth,” Hitoshi Hayakawa, an analyst at Credit Suisse Group AG, said in a note to clients yesterday. “In this burgeoning era of smartphones and LTE, eAccess’ network of antenna base stations is also a highly appealing asset.”
Softbank has lured subscribers as the country’s first carrier to offer Apple’s iPhone and iPad, narrowing the gap in user numbers with NTT DoCoMo Inc. (9437), the largest mobile phone service, and KDDI (9433) Corp., the No. 2 provider. The iPhone 5 went on sale Sept. 21.
Softbank gained 2.9 percent to 3,195 yen today. The Tokyo- based company will pay 16.74 of its shares for each share of eAccess, valuing the target’s stock at 53,484 yen apiece at today’s closing price.
Including eAccess’s 223 billion yen of net debt, the deal is valued at 408 billion yen based on today’s price for Softbank, according to data compiled by Bloomberg.
“With this agreement, we’ll be able to offer the best broadband services,” Son said. “We don’t think we’re overpaying.”
The release of the iPhone 5, which can work with the faster long-term evolution, or LTE, standard, was one motivation for pursuing the deal, Son said.
“EAccess’s business model may be reaching its limit, while Softbank’s task has been to strengthen its service,” Ichiro Takamatsu, a fund manager at Tokyo-based Bayview Asset Management, said by phone. “Softbank may have been able to buy a bit cheaper.”
Goldman Sachs owns about 31 percent of eAccess, according to Sayaka Iida, a spokeswoman for eAccess.
DoCoMo, KDDI and Softbank are competing in a market where the number of subscribers exceeds Japan’s population of 127 million.
Softbank added more users in August than DoCoMo or KDDI and had 30.1 million subscribers at the end of the month, trailing DoCoMo’s 60.6 million and KDDI’s 35.9 million, according to data compiled by Bloomberg. EAccess had 4.1 million subscribers as of June 30, according to its announcement in August.
EAccess will be converted into a wholly owned unit and will be delisted Feb. 25.
Son’s net worth is valued at $9.8 billion, and he is the 100th wealthiest individual in the world, according to the Bloomberg Billionaires Index. His wealth has climbed 33 percent so far this year as Softbank’s shares surged.
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