SoftBank Corp. (9984)’s latest offer for Sprint (S:US) Nextel Corp. gives shareholders more cash but a smaller stake in the new company, making the valuation $1.1 billion lower, said Gerard Hallaren, an analyst at Janco Partners Inc.
With SoftBank’s new bid, released this week, the Japanese wireless carrier is offering to pay $16.6 billion to Sprint shareholders, plus an injection of $5 billion in new capital, in return for a 78 percent stake in the U.S. company. While that’s $1.5 billion above the original offer, Sprint shareholders will only get 22 percent of the new company, instead of 30 percent.
Sprint’s total valuation is $27.75 billion under the new agreement, compared with $28.88 billion in the previous bid, estimates Hallaren, who is based in Greenwood Village, Colorado. While the Sprint board has endorsed SoftBank’s offer, the idea of accepting a purportedly higher bid at a lower valuation is “preposterous,” he said in a report.
“We have little faith this proposal will succeed,” said Hallaren, who maintains a buy rating on Sprint.
Scott Sloat, a spokesman for Overland Park, Kansas-based Sprint, declined to comment.
The higher cash infusion probably helped sway some investors who had opposed the deal or been on the fence, Hallaren said. Sprint also doesn’t believe Dish Network Corp. (DISH:US)’s bid for the carrier will lead to a superior offer, he said.
The price being paid to investors per share is rising to $7.65 from $7.30, SoftBank and Sprint said a joint statement.
“Some investors probably like getting more cash today rather than owning Sprint tomorrow,” Hallaren said.
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