SoftBank to spend $1.26 bln for majority Brightstar stake

Reuters

By Sinead Carew

NEW YORK, Oct 18 (Reuters) - Japan's SoftBank Corp said on Friday it had agreed to pay $1.26 billion for a 57percent stake in privately held cellphone distributor BrightstarCorp as it looks to boost its bargaining power with handsetmakers.

SoftBank, which owns 80 percent of No. 3 U.S. mobileoperator Sprint Corp, said that under the agreement itsownership of Brightstar would increase to 70 percent over thenext five years, or upon certain unspecified events.

SoftBank, which is valuing Brightstar at $2.2 billion, hadannounced earlier this week it was in talks with the company,which delivers phones, tablets and accessories frommanufacturers to wireless operators and retailers.

SoftBank's billionaire founder, Masayoshi Son, has said thatbuying Sprint would allow SoftBank, which also runs a mobilenetwork in Japan, to buy phones in bigger volumes and avail ofdiscounts from an industry dominated by Samsung Electronics CoLtd and Apple Inc.

As part of the deal, the companies said that a buying &innovation division in Brightstar would realize savings andefficiencies for SoftBank, Sprint, and Brightstar. Under theagreement, Brightstar will become the exclusive provider ofhandsets to certain SoftBank affiliates.

By combining the buying power of Brightstar's customers in50 countries with that of SoftBank's various telecom affiliates,Brightstar would become a buyer of $20 billion worth of mobileequipment and services per year according to a person familiarwith the deal who asked not to be named.

"When you have that level of buying power it puts you at thetable, not just from a savings perspective, but also when devicemanufacturers want to talk to you about the latest and greatestproducts," said the person who hopes the deal will start tolevel the playing field with bigger operators and SoftBank.

However, it was not immediately clear how the deal mightaffect existing partnerships at Brightstar which lists Sprint'sthree biggest rivals Verizon Wireless , AT&T Inc and T-Mobile US as customers. T-Mobile declinedto comment for the story and AT&T and Verizon did not respond.

Analysts said there appeared to be a big risk thatBrightstar's three big US customers could take their businesselsewhere rather than partner with the company which would havethe same majority owner as No. 3 U.S. mobile provider Sprint.

IDC analyst John Jackson suggested that SoftBank may try tocreate some benefit from the deal for Sprint's rivals too.

"I would certainly think the existing Brightstar customerswill want to review their situation," said Jackson. But headded, "None of this will have been lost on SoftBank. The wholemodel falls down without the scale of the other operators."

Brightstar generated earnings before interest, taxes,depreciation and amortization of about $260 million on revenuesof more than $7 billion for the 12 months ended June 2013, thecompanies said.

Brightstar founder and Chief Executive Marcelo Claure willinitially retain 43 percent ownership in the company but hisownership will decline as SoftBank increases its stake.

The Brightstar transaction, which has been approved bySoftBank's board, will be subject to regulatory approval,according to the companies which expect to close the deal by theend of 2013.

SoftBank said it is financing the deal with $1.26 billion incash on hand and intends to guarantee Brightstar's outstanding$350 million senior unsecured notes due 2016 and $250 millionsenior unsecured notes due 2018.

Earlier this week, SoftBank also said it spent $1.5 billionfor a 51 percent stake in Finnish mobile games maker Supercell,valuing the small maker of hit games "Clash of Clans" and "HayDay" at $3 billion.

Goldman, Sachs was financial adviser to Brightstar, andCleary Gottlieb Steen & Hamilton LLP and K&L Gates LLP served aslegal counsel. The Raine Group LLC advised SoftBank and Morrison& Foerster LLP acted as lead counsel to SoftBank.

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