April 1, 2023

DealBook: Sprint Says It Is in Negotiations With SoftBank of Japan

9:47 p.m. | Updated

Two giants overwhelmingly dominate the wireless market in the United States. Now a merger deal is in the works that could produce a robust challenger.

Sprint Nextel said Thursday that it was in discussions with SoftBank over a “potential substantial investment.” The talks, which began this summer, center on SoftBank, a Japanese telecommunications company, paying $12.5 billion for a stake of about 70 percent in Sprint, according to a person briefed on the matter who was not authorized to speak publicly. The talks emerged just a week after Deutsche Telekom, the parent of T-Mobile USA, announced a reverse takeover of another smaller company in cellphone service, MetroPCS. The spate of deal-making is aimed at shifting the balance of power in a United States market largely controlled by Verizon Wireless and ATT. They have more than 200 million customers — more than their next six competitors combined.

Related Links

As the No. 3 cellphone service provider, Sprint, with more than 56 million subscribers, has long struggled to catch up. In recent years, it has sought to compete primarily on price. But the T-Mobile-MetroPCS merger could create a tougher competitor in the lower end of the cellphone market.

Sprint Nextel

While Sprint has committed billions of dollars to revamping its infrastructure, hoping to develop a Long Term Evolution high-speed network, it has been constrained by limited financial resources. Sprint carried nearly $21 billion in long-term debt as of June 30, and it has lost money every year since 2007.

A deal with SoftBank would promise to provide Sprint with substantial financial power. SoftBank, one of Japan’s largest cellphone service providers, could supply additional resources for Sprint to develop its next-generation network.

The combined company could subsequently consider other deals, possibly including a takeover of Clearwire, a wireless services provider of which Sprint owns a significant stake. Shares of Clearwire jumped nearly 71 percent Thursday on that prospect. And a stronger Sprint could make a run at a merged MetroPCS-T-Mobile. Sprint nearly acquired MetroPCS this year, but its board vetoed the deal as too expensive.

The person briefed on the matter said Thursday that SoftBank and Sprint are focused on their own deal now.

Buying Sprint would give SoftBank an entry into the American market, one of the largest and most profitable in the world.

Chetan Sharma, an independent telecommunications analyst, said a deal between Sprint and SoftBank would probably give SoftBank control over the broad direction of Sprint. SoftBank could influence how Sprint deploys network upgrades or adds services for customers, he said. But a deal would not necessarily accelerate Sprint’s deployment of L.T.E., the fourth-generation cellular network, because Sprint is already on track to expand its newer network aggressively by the end of 2013, Mr. Sharma said.

The more likely result that Sprint customers can expect is new services. Japanese and South Korean carriers are leading the way with innovative mobile services, he said, including mobile payments and analytics that look at a customer’s personal data to provide better map directions or recommendations for things to buy. Such services could open doors to new methods of mobile advertising for Sprint, he said.

“Things that Google and Apple are trying to do here, operators are doing in those countries,” Mr. Sharma said.

A representative of SoftBank was not available for comment.

With a brief statement on Thursday, Sprint confirmed the talks, which had been reported by the Nikkei newspaper of Japan. “Although there can be no assurances that these discussions will result in any transaction or on what terms any transaction may occur, such a transaction could involve a change of control of Sprint,” the statement said.

Shares of Sprint surged more than 14 percent in heavy trading Thursday. But SoftBank’s shares fell more than 15 percent in early trading in Tokyo on Friday.

Under the current outlines of the deal, Sprint would first issue new shares to SoftBank. That would be followed by a tender offer for Sprint’s shares, until the Japanese company reached its 70 percent target holding.

SoftBank is still lining up financing from banks, and any deal is not expected to be announced for several days at least, the person briefed on the matter said.

In pursuing Sprint, SoftBank may see an opportunity to again reshape a country’s cellphone market. The company, founded by the Internet entrepreneur Masayoshi Son, moved into wireless service in 2006 when it acquired Vodafone’s operations in Japan, putting it behind two bigger and more established rivals.

Through a combination of offering attractive devices like the iPhone and faster data networks, as well as by acquisitions, it climbed up the ranks of the Japanese market. Craig Moffett, an analyst with Sanford C. Bernstein, said it was too early to draw conclusions about the meaning of a deal between Sprint and SoftBank. He said a majority investment from SoftBank would just be an effort to scoop up spectrum, the radio waves that carry wireless services, as if it were real estate. Still, it made little sense, he said.

“There are no synergies whatsoever in a Japanese company buying a U.S. telecom operator,” he said. “This is tantamount to Japanese buyers buying Rockefeller Center.”

Article source: http://dealbook.nytimes.com/2012/10/11/softbank-of-japan-said-to-near-a-deal-for-control-of-sprint/?partner=rss&emc=rss

DealBook: Yahoo to Consider Sale of Asian Assets

Yahoo is expected to keep a 15 percent stake in Alibaba, the fast-growing Chinese Internet company.Jin Lee/Bloomberg NewsYahoo is expected to keep a 15 percent stake in Alibaba, the fast-growing Chinese Internet company.

3:46 p.m. | Updated

Yahoo’s board will consider a deal to sell its holdings in the Alibaba Group and its Japanese affiliate back to their majority owners in a complicated tax-free deal valued at about $17 billion, according to people briefed on the matter.

If the board, which is expected to meet Thursday to discuss the broad outlines of the offer, approves pursuing a deal, it may reject separate investment proposals by Silver Lake and TPG Capital, said some of these people, who, like others contacted for this article, spoke on condition of anonymity.

The deal is valued at close to $14 a Yahoo share, these people said. Under the current proposed terms, Alibaba and Softbank, Yahoo Japan’s majority owner, would create new legal entities that would consist of both cash and certain operating assets. Yahoo would then swap out most of its stake in Alibaba and all of its stake in Yahoo Japan for these entities, effectively selling those holdings.

Yahoo is expected to keep a 15 percent stake in Alibaba, allowing it to hold on to a piece of the fast-growing Chinese Internet company, one of these people said.

The proposal values Yahoo’s entire Alibaba stake at about $12 billion and its stake in Yahoo Japan at about $5 billion, this person added. It could be executed either as a standalone deal or alongside a minority investment in Yahoo by Silver Lake or TPG.

Although Yahoo’s board may still chose to reject the offer, or delay the approval, momentum seems to be building for a deal with its Asian partners. Should the board reject the offer, Alibaba and Softbank are prepared to bid for all of Yahoo in conjunction with private equity partners, the person briefed on the matter said.

The deal — officially called a tax-free cash-rich split — would not be considered a sale under Internal Revenue Service guidelines, allowing Yahoo and its Asian partners to avoid taxes.

Shares of Yahoo turned higher moments after DealBook’s report, gaining as much as much as 5 percent in late afternoon trading.

The battle for Yahoo’s future has taken many twists, since the company abruptly ousted its chief executive, Carol A. Bartz, in September. Over the last several weeks, the board has entertained multiple offers from a broad swath of suitors.

Late last month, the company seemed to be leaning toward the sale of a minority stake to private equity suitors. Separate investor groups led by Silver Lake and TPG made bids to acquire stakes of roughly 20 percent, with Silver Lake offering about $16.60 a share and TPG about $1 a share more, two people briefed on the matter previously said. Both proposals involved a share buyback and an alignment with stakes owned by co-founders, Jerry Yang and David Filo, that would effectively give the winning group majority control.

Despite initial support by the board, those proposals have been harshly criticized by shareholders, who are concerned that such a deal will dilute their holdings and concentrate too much power with a new investor group. Daniel S. Loeb, the manager of the hedge fund Third Point, and Capital Research and Management, Yahoo’s largest shareholder, were particularly resistant to the proposals, according to people close to Yahoo.

The resistance weighed on some members of the board, these people said, who were worried about a backlash from shareholders and negative press.

Over the last three weeks, Yahoo restarted talks with Alibaba and Softbank, which had submitted an initial proposal in October. During the negotiations, the two sides agreed to raise the valuation of the Asian assets and to let Yahoo hold on to a small piece of Alibaba, one of these people said.

John Spelich, an Alibaba spokesman, declined to comment.

Alibaba’s team, including its chief financial officer, Joesph Tsai, has been in New York to handle negotiations, two people said.

Though a final deal may not be signed for several weeks, Yahoo’s board will consider on Thursday whether the proposed term sheet is acceptable. If the board consents, negotiations will proceed.

Yahoo’s board has not yet dismissed the proposals from Silver Lake and TPG, according to some of the people briefed on the matter, but it may pursue an independent path if it accepts Alibaba and Softbank’s offer. Some on Yahoo’s board believe the company will be better positioned– once it gets a cash infusion — to appoint a new chief executive and reconfigure ts board.

Still, two of these people warned that no outcome was certain because the board had been splintered on several issues throughout the process, including Yahoo’s identity and how it should operate going forward.

Yahoo did not immediately respond to a request for comment.

Article source: http://dealbook.nytimes.com/2011/12/21/yahoo-to-consider-sale-of-asian-assets/?partner=rss&emc=rss