Japan’s SoftBank”and Sprint Nextel Corporation have entered into a series of definitive agreements under which SoftBank will invest $20.1 billion in Sprint, consisting of $12.1 billion to be distributed to Sprint stockholders and $8.0 billion of new capital to strengthen Sprint’s balance sheet.
Sprint Nextel has been struggling to compete in an industry dominated by AT&T and Verizon Wireless and can tap into SoftBank’s technology and expertise in rolling out high-speed 4G networks that are now being rolled out by competitors.
The deal will also mark the disappearance of the Nextel name. The company, founded in the Washington, D.C., area, specialized in provided push-to-talk technology for contractors and other businesses that eliminated many two-way radio systems. Sprint acquired the company but struggled with integrating networks.
Current Delaware Gov. Jack Markell was one of the original employees of Nextel. He has cited his experiences at the start-up company during his political career that also included serving as Delaware State Treasurer.
Following closing, SoftBank will own approximately 70 percent and Sprint equity holders will own approximately 30 percent of the shares of New Sprint,
Completion of the transaction is subject to Sprint stockholder approval, customary regulatory approvals and the satisfaction or waiver of other closing conditions. The companies expect the closing of the merger transaction to occur in mid-2013.
The deal will give Sprint $8 billion of primary capital to enhance its mobile network and strengthen its balance sheet
Sprint CEO, Dan Hesse, said, “This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward. Our management team is excited to work with SoftBank to learn from their successful deployment of LTE in Japan as we build out our advanced LTE network, improve the customer experience and continue the turnaround of our operations.”
New Sprint will become a publicly-traded company and Sprint will survive as its wholly-owned subsidiary. Of the $17 billion, $4.9 billion will be used to purchase newly issued common shares of New Sprint at $5.25 per share. The remaining $12.1 billion will be distributed to Sprint stockholders in exchange for approximately 55 percent of currently outstanding shares. The other 45 percent of currently outstanding shares will convert into shares of New Sprint. SoftBank will also receive a warrant to purchase 55 million additional Sprint shares at an exercise price of $5.25 per share.
Pursuant to the merger, holders of outstanding shares of Sprint common stock will have the right to elect between receiving $7.30 per Sprint share or one share of New Sprint stock per Sprint share, subject to proration. Holders of Sprint equity awards will receive equity awards in New Sprint.
SoftBank is financing the transaction through a combination of cash on hand and a syndicated financing facility.
