Softbank has upped its offer for Sprint Nextel by US$1.5bn and changed the balance of its proposal giving shareholders more cash and less equity.
The new merger agreement, endorsed by Sprint, gives the target’s shareholders an extra US$4.5bn in cash….
Softbank has upped its offer for Sprint Nextel by US$1.5bn and changed the balance of its proposal giving shareholders more cash and less equity.
The new merger agreement, endorsed by Sprint, gives the target’s shareholders an extra US$4.5bn in cash. Investors will now receive US$5.50 per share in cash rather than US$4.00.
To balance this Softbank is reducing the equity consideration by US$3bn. If the merger goes through the Japanese telco would now hold 78% of Sprint post takeover, up from 70% in its first bid from last October. It takes Softbank’s total offer up from US$20.1bn to US$21.6bn.
Sprint shareholders were set to vote on Softbank’s proposal tomorrow, but that has now been pushed back to 25 June.
Hedge fund Paulson & Co, which had been in favour of Dish Network’s rival bid, has now come out in favour of Softbank’s new offer.
The breakup fee has also gone up by US$200m. Softbank would now receive an US$800m break-up fee if a competing bidder comes in and acquires Sprint.
“We believe this probably gets it done,” said New Street Research analyst Jonathan Chaplin in a memo. He said that while Softbank’s new offer is only a small premium on Dish’s, it had the advantage of being “reliable”.
In a note Nomura analyst Mike McCormack thought the new offer was likely to gain traction.
“Barring a raised bid from Dish, we expect opposition to this new offer to be limited,” he said.
Dish cold shouldered
In its statement Sprint also said that its special committee determined that Dish’s proposal made in April was not likely to lead to a superior offer. Dish proposed a US$25.5bn merger and began due diligence in May.
Larry Glasscock, chairman of the Sprint’s special committee, said: “We have expended substantial time and energy engaging with Dish 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.”
The wireless operator requested that Dish destroy confidential information Sprint made available in the course of its diligence.
The revised proposal gives Dish a deadline of 18 June to put forward its “best and final” offer.
In Softbank and Sprint’s new agreement, the definition of a “superior offer” has been altered – it now excludes “any proposal that is not fully financed pursuant to binding commitments from recognized financial institutions”.
In a statement Dish commented: “We continue to believe that Sprint has tremendous value. We will analyse the revised Softbank bid as we consider our strategic options.”
New Street analyst Chaplin commented: “Dish may still come back with another offer; however, we think the odds of Dish winning at this point are relatively remote.”
“We acknowledge that trying to anticipate what Dish will do next is difficult – Ergen is a master tactician with an unbounded ability to surprise.”
