SoftBank to spend $1.26 billion for majority Brightstar stake

By Sinead Carew

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

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

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

SoftBank's billionaire founder, Masayoshi Son, has said that buying Sprint would allow SoftBank, which also runs a mobile network in Japan, to buy phones in bigger volumes and avail of discounts from an industry dominated by Samsung Electronics Co Ltd and Apple Inc.

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

By combining the buying power of Brightstar's customers in 50 countries with that of SoftBank's various telecom affiliates, Brightstar would become a buyer of $20 billion worth of mobile equipment and services per year according to a person familiar with the deal who asked not to be named.

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

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

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

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

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

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

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

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

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

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

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

(Reporting by Sinead Carew; Editing by Gerald E. McCormick, Jeffrey Benkoe and Andrew Hay)