Sprint will become New Sprint next year as the company together with Japanese telecoms giant SoftBank have revealed their plans for an acquisition worth $20.1 billion.
In a press conference in Tokyo, both companies revealed that after the investment to be made by SoftBank, the Japanese firm will own about 70 percent of the fully-diluted shares of New Sprint.
This will comprise of an $8-billion purchase new shares to be issued by New Sprint and a $12.1-billion purchase of existing Sprint stock.
The remaining 30 percent stake of New Sprint will be owned by current shareholders including major shareholders which include Capital Research Global Investors, Dodge & Cox and Ontario Teachers Pension Plan Board.
If you want to split hairs, SoftBank expects to acquire 3,241,403,146 shares of New Sprint.
According to Sprint and SoftBank, they expect the deal to close by mid-2013 subject to approval at a meeting of the Sprint shareholders, customary antitrust, Federal Communications Commission and other regulatory approvals and the satisfaction or waiver of other closing conditions, including accuracy of representations and warranties.
The deal, according to both firms, will benefit them in the following ways:
- Enables SOFTBANK to establish an operating base as one of the largest mobile Internet companies in the world. The combined subscriber base will be one of the largest2 between the U.S. and Japan, and the combined mobile telecom service revenue will rank third3 amongst global operators.
- Enables SOFTBANK to leverage its deep expertise in smartphones and next-generation mobile networks, and its track record of success in competing in mature markets with large incumbents, to enhance Sprint’s competitiveness in the U.S.
- Provides Sprint USD 8.0 billion of new capital for its mobile network, strategic investments, and balance sheet as part of its continued efforts to fortify its operating base towards future growth.
Masayoshi Son, CEO of SoftBank, said in a statement that “This transaction provides an excellent opportunity for SOFTBANK to leverage its expertise in smartphones and next-generation high-speed networks, including LTE, to drive the mobile Internet revolution in the world’s largest market.”
“As we have proven in Japan, we have achieved a V-shaped earnings recovery in the acquired mobile business and grown dramatically by introducing differentiated products and innovative services to an incumbent-led market. Our track record of innovation, combined with Sprint’s strong brand and local leadership, provides a constructive beginning toward creating a more competitive American mobile market,” Son, who is the second-richest person in Japan, added.
Dan Hesse, CEO of Sprint, also added in the statement that “This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward.”
“Our management team is excited to work with SoftBank to learn from their successful deployment of LTE in Japan as we build out our advanced LTE network, improve the customer experience and continue the turnaround of our operations,” he added.
Hesse will be named the CEO of New Sprint when the company is formed after the acquisition by SoftBank.
According to SoftBank and Sprint, the transaction is fully funded by cash at hand and a bridge financing facility arranged and underwritten by Mizuho Corporate Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Deutsche Bank AG, Tokyo Branch.
Lead financial advisors for SoftBank are The Raine Group LLC and Mizuho Securities Co., Ltd.
Mizuho Corporate Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Deutsche Bank AG, Tokyo Branch acted as mandated lead arrangers to SoftBank. Morrison & Foerster LLP, Mori Hamada & Matsumoto and Dow Lohnes PLLC are serving as legal counsel to SoftBank. Deutsche Bank also provided financial advice to SoftBank in connection with this transaction.
Meanwhile, Masayoshi Son rationalized his decision to acquire Sprint:
“I am a man, and every man wants to be number one, not number two or number three.” Actual quote from Softbank’s Son on $S deal
— Jim Cramer (@jimcramer) October 15, 2012
Son also did not close the door on acquiring more companies aside from New Sprint as he said the possibility is always there.