SoftBank Corp. (9984), the Japanese mobile carrier controlled by Masayoshi Son, raised its offer for Sprint Nextel Corp (S). by 7.5 percent to $21.6 billion to counter a bid from billionaire Charlie Ergen’s Dish Network Corp (DISH).
SoftBank will pay $16.6 billion to Sprint shareholders and inject $5 billion of new capital into the target for a 78 percent stake, the Tokyo-based carrier said in a statement today. Dish has until June 18 to make its “best and final” offer as its current $25.5 billion proposal isn’t “actionable,” Sprint said separately.
Billionaire Son, who has the backing of Sprint’s board and second-largest investor Paulson & Co., raised the stakes to fulfill his ambition of expanding into North America with the third-largest U.S. carrier. Success for the Japanese company would thwart Ergen’s plan to break into wireless and offer a bundle of satellite TV, mobile and Internet services.
“If SoftBank can’t buy Sprint, it will mess up Son’s strategy for growth, so this is very positive,” said Masamitsu Ohki, a fund manager at Stats Investment Management Co., a Tokyo based hedge fund. “This would be the first step for his global strategy since he can’t expect growth from the Japanese domestic market.”
Shares (9984) of SoftBank fell 0.4 percent to 5,500 yen at the close of trade in Tokyo, trimming this year’s gain to 75 percent. Japan’s benchmark Nikkei 225 Stock Average fell 1.5 percent today. Sprint shares fell 0.8 percent to $7.18 yesterday in New York.
SoftBank will acquire shares from existing Sprint investors for $7.65 apiece, up from the previous offer of $7.30, the company said in its statement, with Sprint’s board of directors unanimously approving the new offer. Son’s initial offer for Overland Park, Kansas-based Sprint in October was $20.1 billion for a 70 percent stake.
“SoftBank is trying to assure its purchase,” said Tomoaki Kawasaki, a Tokyo-based analyst at Iwai Cosmo Holdings Inc. (8707) “It already had a better bid. Raising its stake means SoftBank must have confidence it can revive Sprint’s earnings.”
A Sprint shareholder vote on the proposal was postponed to June 25 from June 12. The breakup fee for the deal increased to $800 million from $600 million.
Sprint investors are likely to support the new SoftBank bid, Nathan Ramler, an analyst at Macquarie Group Ltd. in Tokyo, said in a report today.
Dish’s offer included $4.76 cash and 0.05953 Dish shares for each Sprint share, according to an April 15 statement. The offer was worth $7 a share, with Sprint investors to own 32 percent of the combined company, Dish said at the time.
Dish’s existing proposal for Sprint, which includes cash and shares in a combined company, “is not reasonably likely to lead to a superior offer,” Sprint said.
“We will analyze the revised SoftBank bid as we consider our strategic options,” Englewood, Colorado-based Dish said in a statement. “We continue to believe that Sprint has tremendous value.”
Son has argued that Dish’s offer would burden Sprint with too much debt. Sprint and SoftBank expect their transaction to close in early July, they said.
“In addition to the improved financial terms, Paulson believes SoftBank has exceptional operating expertise in the wireless area and a strategic vision,” Paulson & Co. said in a statement. The investor owns 231 million Sprint shares, it said.
Institutional Shareholder Services Inc., the biggest shareholder-advisory firm, recommended SoftBank’s earlier bid in a report this month, saying the deal would supply Sprint with the cash it needs to upgrade its network and compete with larger carriers.
“The amended agreement announced today delivers more upfront cash to Sprint stockholders, while still achieving our goal of creating a well-capitalized Sprint,” Son said in the statement.
Sprint’s board initially approved the SoftBank takeover in October after months of friendly discussions with the Japanese carrier. Sprint and SoftBank have received national-security approval for the deal from the U.S. government.
Son is the 66th richest person in the world with a net worth of $13.6 billion, according to the Bloomberg Billionaires Index. His fortune has increased by $4.7 billion in 2013.
Ergen is ranked 87th in the daily listing of the 200 wealthiest billionaires with a net worth of $11.8 billion. He’s gained about $694 million this year.
“You can’t rule out the possibility that Dish will raise its offer and SoftBank will again counter it,” said Hiroshi Yamashina, an analyst at BNP Paribas SA in Tokyo. “It’s hard to say this will be final.”
Standard & Poor’s and Moody’s Investors Service put the Japanese company’s credit ratings under review for possible downgrade in October on concern the Sprint acquisition may undermine its financial strength. A downgrade of one step would bring the rating to a speculative, or junk, ranking at Moody’s. SoftBank is currently rated at the second-lowest investment grade by S&P.
SoftBank is facing a total of 1.04 trillion yen ($10.6 billion) of debt coming due in the next two years, including 300 billion yen of bonds maturing in March 2015, data compiled by Bloomberg show.
Dish and Sprint also are competing for Clearwire Corp. (CLWR:US), which is about 50 percent owned by Sprint. Dish’s bid values the wireless broadband provider at $6.5 billion.
Sprint has been attempting to buy the rest of Clearwire since December, while Dish’s bids for the company and for Sprint are part of Ergen’s plan to expand beyond satellite TV.
To contact the reporters on this story: Mariko Yasu in Tokyo at email@example.com; Naoko Fujimura in Tokyo at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Tighe at email@example.com