Japanese cellphone company SoftBank Corp. has finally loosened its proposed terms with Sprint Nextel Corp. (S), providing the latter a scope to consider DISH Network’s (DISH) bid. Although, Sprint had previously drawn a waiver from SoftBank to seek more information on DISH’s proposal, it did not receive any relaxation on terms that would allow it to disclose non-public information. Further, Sprint was also not allowed to consider the acquisition bid offer from DISH.
In Oct 2012, it was reported that the company was in negotiations to sell about 70% of its stake to Softbank for a total consideration of $20.1 billion. However, this offer was trumped by DISH which made a counter offer of $7 per share (inclusive of $4.76 in cash and 0.05953 shares in DISH for each Sprint share).
Despite some of the major shareholder’s of Sprint walking in favor of the DISH proposal considering it lucrative, the company specified that its support toward SoftBank’s acquisition proposal remains unchanged. The reason behind such consideration could be the negatives attached to the DISH offer.
While the successful completion of the deal might enable Sprint to overcome its spectrum shortage issue and gain financial strength, the deal will also result in a few negative synergies for both the companies. The complete acquisition of Sprint Nextel will inflate DISH Network’s leverage position by a huge margin as the combined debt of both the companies will stand at nearly $28 billion. Further, the merged company will have to pay nearly $600 million as break-up fee to SoftBank, if it wishes to terminate its arrangements with the latter.
We believe the fate of the Sprint, Softbank and DISH trilogy will meet some conclusion in mid summer when Sprint shareholders vote for the approval of the SoftBank deal on Jun 12. Meanwhile, DISH and SoftBank both are gearing up for their big buyout.
According to market reports, SoftBank raised around $3.3 billion in Apr 2012 in a dual-tranche bond issued in dollars and Euros to fund the Sprint acquisition, following issuance of 300 billion yen in bonds March. Recent reports suggest that the company is also issuing 400 billion yen ($3.9 billion) in bonds to retail investors to fund its billion dollar Sprint buyout
On the other hand, DISH is also adopting similar strategies to fund its proposed deal. DISH Network raised $2.3 billion debt from the market and is further negotiating with firms like Barclays Plc, Macquarie Group, Jefferies and the Royal Bank of Canada to facilitate around $9 billion in debt to get through the Sprint deal.
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