SoftBank has sweetened its bid for the third largest US. Phone carrier Sprint Nextel, as it looks to become one of the world’s largest mobile operators.
14th June 2013
Softbank of Japan has agreed to sweeten its takeover bid for Spring Nextel to $ 21.6 billion, seeking to block a rival bid by Dish Network. Sprint, based in Overland Park is hopeful that Dish would not be able come up with an offer superior to Softbank. It has ended the discussions with Dish and offered June 18th as a last date for a best and final offer. Proxy advisory firm Institutional Shareholder Services (ISS) has recommended Sprint Nextel Corp (S.N) shareholders to vote for Softbank Corp’s revised offer.
Under the revised terms of the complex transaction, SoftBank agreed late on Monday to shift about $ 1.5 billion earmarked for Sprint, a U.S. cell phone carrier, itself to the company’s shareholders instead. Existing investors can now sell their shares at $ 7.65 a piece, up nearly by 5 percent from the first offer. SoftBank would own about 78 percent of Sprint if the deal is approved. Spring added that it had ended sales talks with Dish, a U.S. satellite television provider, which surprised many in April by offering $ 25.5 billion for a buyout or about $ 7 a share. Sprint said that its newer suitor had failed to put forward an acceptable forward bid despite weeks of conducting due diligence. The new offer pushes more cash to Sprint shareholders $ 16.6 billion, up from 12.1 billion. In exchange SoftBank would own 78% of Sprint compared to 70% earlier. Shares of Sprint increased by 2.1% by Tuesday trading at $ 7.34. Paulson & Co, Sprint’s second largest shareholder said it will vote its entire share for Softbank’s sweetened offer. The Treasury Department’s Committee on Foreign Investment has already cleared Softbank’s bid, by saying it did not find national security reasons to prevent it. The Softbank deal would also need the approval from Federal Communications Commission, but Sprint expects the transaction to close in early July.
Strategy behind the deal
The new proposal by SoftBank, cobbled together largely over the weekend, is aimed at preserving SoftBank’s biggest gamble: buying control of Sprint to challenge the existing bigwigs of the U.S. cellphone market, AT &T and Verizon Wireless. Its plans include infusing Sprint with billions of dollars to build out a nascent high speed data network. SoftBank has reiterated that it intended to invest $ 1.9 billion in Sprint if its deal is closed; in addition to the $ 3.1 billion it already invested onto the company. The Japanese company has been challenged by the emergence of Dish as a bidder.
On the other hand, to negate Softbank’s acquisition deal on a number of fronts. Charles W. Ergen, Dish network’s chairman, has contended that the deal would create a new behemoth that could offer a variety of wireless services, like cell phone coverage and satellite television. Dish has time till June 18th to propose an acceptable “best and final” bid. The amended agreement with SoftBank puts in place a number of additional restrictions, including forcing Dish to present fully committed financing and the adoption of defenses that would limit a hostile bid. Sprint shareholders had been scheduled to vote on Wednesday on the previous Softbank offer, but the companies have pushed that back to June 25th following Softbank’s revised offer.