Softbank Corp. (9984) gained in Tokyo for the first time in nine trading days after announcing a deal to buy Sprint Nextel Corp. (S) for $20.1 billion to expand into the U.S. mobile-phone services market.
The purchase of a 70 percent stake in Sprint will create a combined entity of 96 million users and the world’s third- biggest mobile-phone company by revenue, Softbank’s billionaire President Masayoshi Son said yesterday. The deal enables Son to seek growth outside of Japan, where handset shipments have declined 27 percent in the past five years.
“It was positive that Son spoke in his own words about the outline and rationale for the investment plan,” said Hitoshi Hayakawa, a Credit Suisse Group AG analyst in Tokyo. “Softbank has accumulated expertise in wireless business, and there could be synergies if Softbank can import advanced services offered in the U.S. to other markets such as Japan.”
Softbank will pay $12.1 billion to Sprint shareholders and the deal includes $8 billion of new capital, according to a statement distributed in Tokyo yesterday.
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.
The deal will be funded by cash on hand and bridge financing, and the company won’t sell new shares, Son said yesterday. Softbank had $9.5 billion in cash and near cash items at the end of June, according to data compiled by Bloomberg.
The comments on the share sale “cleared concerns over dilution and negative impacts on the company’s financial strength,” Shinji Moriyuki, an analyst at SMBC Nikko Securities in Tokyo, wrote in a report yesterday, reiterating his outperform rating for the stock.
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