Less than a week after reports began circulating about a possible deal between Japanese carrier SoftBank and Sprint, an agreement between the two companies has been reached. It was announced this morning that SoftBank will invest $20.1 billion into Sprint, with $12.1 billion of that going to Sprint stockholders and the remaning $8 billion being used as new capital to be pumped into Sprint. The deal will give SoftBank a 70 percent stake in Sprint. The boards from both companies have approved the deal, but it must still get a thumbs up from Sprint stockholders as well as the usual regulatory entities. Completion of the agreement is expected to occur in mid-2013.
In the announcement of the deal, Sprint CEO Dan Hesse (who will remain on as CEO of the post-merger New Sprint) said that the transaction will allow Sprint to learn from SoftBank's LTE rollout in Japan and improve the experience of its customers. Sprint is currently in the process of rolling out its LTE network, with 24 markets currently live and another 120 or so expected to be lit up in the coming months. While the completion of this SoftBank-Sprint deal is still a ways off, the investment is obviously a big one for Sprint, and it'll be interesting to see what comes of this deal if it does actually go through. The full announcement of the agreement between SoftBank is Sprint is available below.
SoftBank to Acquire 70% Stake in Sprint
Sprint Stockholders to Receive Total Consideration of $12.1 Billion in Cash and 30% Ownership in Newly Capitalized Sprint
Transaction Provides Sprint with $8.0 Billion of New Capital
Sprint to Leverage SoftBank’s Experience in Deployment of LTE as Sprint’s Nationwide Rollout of 4G LTE Continues
Significant Investment in the United States by One of the World’s Most Successful and Innovative Companies
Sprint will host an investor conference call to discuss the transaction at 8 a.m. ET today. Participants may dial 800-938-1120 in the U.S. or Canada (706-634-7849 internationally) and provide the following ID: 44906693 or may listen via the Internet at www.sprint.com/investors
TOKYO & OVERLAND PARK, Kan. (BUSINESS WIRE), October 15, 2012 - SOFTBANK CORP. (“SoftBank”) (TSE: 9984) and Sprint Nextel Corporation (“Sprint”) (NYSE: S) today announced that they have entered into a series of definitive agreements under which SoftBank will invest $20.1 billion in Sprint, consisting of $12.1 billion to be distributed to Sprint stockholders and $8.0 billion of new capital to strengthen Sprint’s balance sheet. Through this transaction, approximately 55% of current Sprint shares will be exchanged for $7.30 per share in cash, and the remaining shares will convert into shares of a new publicly traded entity, New Sprint. Following closing, SoftBank will own approximately 70% and Sprint equity holders will own approximately 30% of the shares of New Sprint on a fully-diluted basis.
SoftBank’s cash contribution, deep expertise in the deployment of next-generation wireless networks and track record of success in taking share in mature markets from larger telecommunications competitors are expected to create a stronger, more competitive New Sprint that will deliver significant benefits to U.S. consumers. The transaction has been approved by the Boards of Directors of both SoftBank and Sprint. Completion of the transaction is subject to Sprint stockholder approval, customary regulatory approvals and the satisfaction or waiver of other closing conditions. The companies expect the closing of the merger transaction to occur in mid-2013.
SoftBank Chairman and CEO, Masayoshi Son, said, “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 one of the world’s largest markets. 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 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 wireless market.”
The SoftBank transaction is expected to deliver the following benefits to Sprint and its stockholders:
Provides stockholders the ability to realize an attractive cash premium or to hold shares in a stronger, better capitalized Sprint
Provides Sprint with $8.0 billion of primary capital to enhance its mobile network and strengthen its balance sheet
Enables Sprint to benefit from SoftBank’s global leadership in LTE network development and deployment
Improves operating scale
Creates opportunities for collaborative innovation in consumer services and applications
Sprint CEO, Dan Hesse, said, “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.”
SoftBank will form a new U.S. subsidiary, New Sprint, which will invest $3.1 billion in a newly?issued Sprint convertible senior bond following this announcement. The convertible bond will have a 7-year term and 1.0% coupon rate, and will be convertible, subject to regulatory approval, into Sprint common stock at $5.25 per share. Immediately prior to the merger, the bond will be converted into shares of Sprint, which will become a wholly-owned subsidiary of New Sprint.
Following Sprint stockholder and regulatory approval, and the satisfaction or waiver of the other closing conditions to the merger transaction, SoftBank will further capitalize New Sprint with an additional $17 billion and effect a merger transaction in which New Sprint will become a publicly-traded company and Sprint will survive as its wholly-owned subsidiary. Of the $17 billion, $4.9 billion will be used to purchase newly issued common shares of New Sprint at $5.25 per share. The remaining $12.1 billion will be distributed to Sprint stockholders in exchange for approximately 55% of currently outstanding shares. The other 45% of currently outstanding shares will convert into shares of New Sprint. SoftBank will also receive a warrant to purchase 55 million additional Sprint shares at an exercise price of $5.25 per share.
Pursuant to the merger, holders of outstanding shares of Sprint common stock will have the right to elect between receiving $7.30 per Sprint share or one share of New Sprint stock per Sprint share, subject to proration. Holders of Sprint equity awards will receive equity awards in New Sprint.
Post-transaction, SoftBank will own approximately 70% and Sprint equity holders will own approximately 30% of New Sprint shares on a fully-diluted basis.
SoftBank is financing the transaction through a combination of cash on hand and a syndicated financing facility.
The transaction does not require Sprint to take any actions involving Clearwire Corporation other than those set forth in agreements Sprint has previously entered into with Clearwire and certain of its shareholders.
After closing, Sprint’s headquarters will continue to be in Overland Park, Kansas. New Sprint will have a 10-member board of directors, including at least three members of Sprint’s board of directors. Mr. Hesse will continue as CEO of New Sprint and as a board member.
The Raine Group LLC and Mizuho Securities Co., Ltd. acted as lead financial advisors to SoftBank. 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. Deutsche Bank also provided financial advice to SoftBank in connection with this transaction. SoftBank’s legal advisors included Morrison & Foerster LLP as lead counsel, Mori Hamada & Matsumoto as Japanese counsel, Dow Lohnes PLLC as regulatory counsel, Potter Anderson Corroon LLP as Delaware counsel, and Foulston & Siefkin LLP as Kansas counsel.
Citigroup Global Markets Inc., Rothschild Inc. and UBS Investment Bank acted as co-lead financial advisors. Skadden, Arps, Slate, Meagher and Flom, LLP acted as lead counsel to Sprint. Lawler, Metzger, Keeney and Logan served as regulatory counsel, and Polsinelli Shughart PC served as Kansas counsel.