Looking to head off any shareholder doubts, Softbank late yesterday increased its offer to acquire Sprint Nextel in a move that was expected by many and subsequently pushed back the vote on the proposal.
Softbank’s updated offer increases the total price of its planned acquisition by 35 cents per share, but more importantly increased the cash portion of that price by $4.5 billion to $16.64 billion. In return, Softbank is now looking to acquire a 78% stake in Sprint Nextel for $21.6 billion compared with the original offer of $20.1 billion for 70%.
Analysts noted that the extra funds are coming from a portion of money that was to be going to Sprint Nextel would now be going to shareholders.
“Softbank and Sprint believe that the reallocation of primary capital to Sprint stockholders is warranted given the companies’ refined operating and capital expenditures synergy expectations resulting from extensive due diligence over the past nine months, as well as Sprint’s improving profitability and execution of its Network Vision plan,” the two companies noted in a joint statement.
The new offer comes after months of wrangling between Softbank and Dish Network over the future of Sprint Nextel.
Sprint Nextel’s special committee and board of directors immediately approved the new offer, adding that the shareholder vote on the proposal has now been rescheduled from June 12 to June 25.
“As amended, the Softbank transaction provides a significant cash premium, maximizes value and certainty for Sprint stockholders, and enhances Sprint’s long-term value by creating a company with an improved balance sheet, greater financial flexibility and a stronger competitive position,” explained Larry Glasscock, chairman of Sprint Nextel’s special committee. “The amended agreement allows Sprint shareholders to receive substantial cash and to begin to participate in Softbank upside on an expedited and low-risk basis. We believe this preserves the timing and closing certainty of the original Softbank transaction.”
Sprint Nextel’s stock spiked on the latest news.
Sprint Nextel placed a June 18 deadline on Dish Network to provide its “best and final” offer, though Dish Chairman Charlie Ergen has shown a propensity to not work well with dealines.
“We have expended substantial time and energy engaging with Dsih over the past nine weeks, including an extensive due diligence process, but these efforts did not lead, in the special committee’s view, to a proposal that was reasonably likely to lead to a proposal superior to Softbank’s,” Glasscock added.
Dish responded to the latest Softbank offer by stating it would explore its “strategic options.”
“We continue to believe that Sprint has tremendous value,” Dish Network noted in a statement. “We will analyze the revised Softbank bid as we consider our strategic options.”
As for Dish, Macquarie Equities Research noted in a report that it thinks the satellite provider was in line to perhaps acquire around 40 megahertz of spectrum from Clearwire and then turn its attention to possibly acquiring a stake in T-Mobile US. Dish recently increased its offer to acquire Clearwire, which is set for a shareholder vote on that proposal on June 13. However, Sprint Nextel’s current ownership position in Clearwire has placed significant hurdles in Dish closing on that deal.
A recent Reuters report indicated that Softbank was looking at T-Mobile US as a possible acquisition target should its attempt to acquire Sprint Nextel fail.
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