One of the biggest deals in recent times was announced in October when SoftBank (SFTBF.PK) revealed a complex $20.1 billion deal to acquire majority control of Sprint Nextel (S). This transaction will combine Japan’s fastest-growing cellphone service provider with the troubled carrier which is the third-largest in the U.S. The rationale is to provide Sprint with a strong partner with deep pockets which can help finance its network upgrade while pursuing additional mergers to facilitate business growth. SoftBank, an internet and communications company is making a bet that it can break the dominance of Verizon (VZ) and AT&T (T) in the United States in a similar fashion to the duopoly that long ruled the Japanese market. The two companies combined would generate around $80 billion in revenues and $18 billion in earnings before interest and tax. Sprint’s customer base would nearly double to 96 million which would give it much larger economies of scale.
This is an unconventional transaction in which Softbank will acquire control of Sprint through a three-step process consisting of buying $3 billion in bonds that will be repaid with stock, $5 billion in new Sprint shares and $12 billion to buy out existing Sprint shareholders. After this is accomplished, Softbank will own 70% of Sprint, with the rest publicly traded. The buyer controlled by Masayoshi Son, an eccentric billionaire ranked by Forbes as Japan’s second-richest man, will add Sprint to a collection of different properties that include Japan’s third-largest mobile operator, a piece of Yahoo Japan. and a stake in Chinese e-commerce giant Alibaba Group Holding Ltd. To continue reading, click here.