Billionaire Masayoshi Son considered a management buyout of Japan’s SoftBank Group Corp. earlier this year and entered talks with an overseas partner, according to people with direct knowledge of the plan.
Son had talks with at least one lender before scrapping the plan at least three months ago when he couldn’t agree with the overseas partner on financing conditions, the people said, asking not to be identified because they aren’t authorized to speak on the matter. While it was the top possible deal earlier this year, Son is no longer considering using that partner, the people said without elaborating.
Mounting debt at the company and losses at U.S. unit Sprint Corp. have driven SoftBank’s market value down to about $65 billion, or less than the stakes it holds in companies including Alibaba Group Holding Ltd. and Yahoo Japan Corp. A deal excluding Son’s 19.3 percent stake would be the biggest management buyout ever, according to data compiled by Bloomberg.
“The fact that Son decided to keep being listed means he might be regaining confidence in future performance,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “It may take a little time, but investors are waiting for the recovery of business in the U.S.”
Shares of SoftBank fell 0.6 percent to 6,513 yen in Tokyo, extending this year’s decline to 9.7 percent
Son has a reputation for considering extreme deals, including those involving companies larger than SoftBank. Even if he decided to proceed, there is no certainty a deal could be completed, another person said.
Son is the biggest shareholder in SoftBank. The value of SoftBank’s publicly traded shares excluding that stake is about $52 billion.
Applying last year’s average premium of about 30 percent in deals targeting Japanese companies, buying out the rest of the company would cost about $68 billion. That would be greater than the total for listed companies globally announced in the past two years, and it also would be more than double the total of all such deals in Japan since 1999.
Since scrapping the plan, SoftBank has announced a 120 billion yen ($993 million) share buyback and boosted its stake in Sprint to about 82 percent.
Sprint rose 1.2 percent to $4.88 at 11:40 a.m. in New York Friday. The shares, which had lost as much as 25 percent this year through late July, have since rebounded and were up 16 percent this year through Thursday.
Hiroe Kotera, a spokeswoman for SoftBank in Tokyo, declined to comment.
Son developed the buyout proposal personally in response to SoftBank’s sagging share price as he sought the greater management freedom of a closely held company, the people said. Nikesh Arora, named as SoftBank’s president in May, was aware of the buyout plan, one of the people said.
Defying convention has been a hallmark of Son’s career. He acquired struggling third-ranked carriers in Japan and the U.S. to battle entrenched larger rivals and invested in more than 1,000 technology businesses while searching for the next Alibaba-sized hit.
In 2006, he arranged a one-year loan from 11 banks to pay for Asia’s largest leveraged buyout, the $16 billion purchase of Vodafone Group Plc’s Japan unit. SoftBank’s credit rating at the time was already below investment grade. Son paid off the bridge loan partly by selling asset-backed bonds in Asia’s largest securitization at the time.
Son announced Japan’s largest outbound acquisition ever with a deal to buy control of Sprint Nextel Corp. in 2012, financed with cash and loans. SoftBank completed the deal the next year for $22 billion.
Son’s penchant for leverage has left the company with net debt of 9.15 trillion yen, the most for any non-financial company in Japan after Toyota Motor Corp., which has about three times SoftBank’s market value.