Last week, rumors had started floating that Softbank may be looking to acquire a majority stake in Sprint Nextel, for more than $12.8 billion, or 1 trillion Japanese yen. Today, it was officially announced that Softbank and Sprint have reached a deal. Softbank will be acquiring roughly 70% of the full diluted share count of Sprint Nextel through an entity called “New Sprint” for $20.1 billion.
Softbank will be buying $8 billion worth of shares from Sprint directly for $5.25 a share, and $12.1 billion worth of shares from external shareholders for $7.3 billion a share. The $8 billion payment will also include a convertible bond worth $3.1 billion.
If the deal doesn’t go through due to regulatory intervention or any other reason, Softbank would have to pay a termination fee of $600 million to Sprint. However, if Sprint’s shareholders don’t approve the transaction, it will have to pay $75 million to Softbank to cover its expenses. Softbank will be taking on significant debt to finance this deal.
This is a great deal for both parties, as Softbank would have an easy way to enter the U.S. market, while Sprint will get access to Softbank’s deep pockets and finance its network upgrades. Both are also developing LTE, which should give them the “economies of scale” advantage. They would also be in a much better position to take on AT&T and Verizon.