Softbank Corp. (9984), which offered $20.1 billion for control of Sprint Nextel Corp. (S), isn’t currently planning to raise its offer after Dish Network Corp. (DISH) made a competing bid, an executive at the Japanese company said.
Japan’s third-largest wireless operator will focus on its existing plans for Sprint, the executive said, asking not to be identified as the discussions are private. Tokyo-based Softbank hasn’t ruled out future action, the executive said.
Dish this week offered $25.5 billion for Overland Park, Kansas-based Sprint, the third-largest U.S. mobile phone company. Softbank founder Masayoshi Son is facing an increasing risk of losing the deal as some Sprint shareholders, including Omega Advisors Inc. and billionaire John Paulson, have said they prefer Dish’s offer.
Sprint agreed in October to a deal that would give Tokyo- based Softbank a 70 percent stake. The Japanese company’s proposal has “superior short- and long-term benefits” compared with Dish’s “highly conditional preliminary proposal,” Softbank said April 16. Softbank expects to complete the acquisition on July 1 under the terms agreed upon, it said.
The stock has lost 6.8 percent in Tokyo trading since Englewood, Colorado-based Dish made its unsolicited offer April 15. That has narrowed Softbank’s gain this year to 39 percent. Takeaki Nukii, a Tokyo-based spokesman for Softbank, declined to comment.
Paulson, who has said he’s waiting to see how Softbank reacts to Dish’s bid, purchased more shares of Sprint in the first quarter after building a 4.2 percent stake last year, according to a letter from his hedge fund, Paulson & Co., to investors. The shares acquired since October had an average price of $5.79, he said in the letter obtained by Bloomberg News.
Dish is offering Sprint’s owners $4.76 in cash and 0.05953 a share of Dish for each Sprint share, a stake that would represent about 32 percent of the combined company.
Dish said the offer is a 13 percent premium to the implied value of Softbank’s deal, which is also a combination of cash and stock.
Softbank would need to boost the cash portion of his offer for Sprint by as much as $2 billion to match Dish, Christopher Larsen, an analyst at Piper Jaffray & Co., said in a report. He has the equivalent of a buy rating for Sprint.
Sprint has to pay Softbank $600 million if it recommends a rival offer, according to terms of the deal. The Japanese company in October closed the purchase of $3.1 billion of convertible bonds than can be exchanged for more than 590 million Sprint shares.
Raising the bid would make billionaire Son’s ambition to expand Softbank in the U.S. cost more, while the company’s credit ratings are already under review for a possible cut to junk.
Standard & Poor’s and Moody’s Investors Service have put the Japanese company’s credit ratings under review for possible downgrade on concern the Sprint acquisition may undermine its financial strength. A downgrade of one step would bring the rating to a speculative, or junk, ranking at Moody’s.
Son, Japan’s second-richest man, said in October he targeted Sprint because it can challenge Verizon Wireless and AT&T Inc.’s dominance of the U.S. mobile-phone industry.
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