Published : Oct. 12, 2012 - 20:31
TOKYO (AFP) ― Japanese mobile carrier Softbank is eyeing a monster $25 billion buy-in to the U.S. telecom market including the takeover of Sprint Nextel in what could be among Japan Inc.’s biggest-ever overseas deals.
But investors threw cold water on the potential marriage as shares of Softbank, Japan’s third-biggest carrier, plunged 16 percent to 2,420 yen on the Tokyo Stock Exchange by the morning close.
Sprint Nextel confirmed Thursday it was talking with Softbank about a takeover, which could help vault the Japanese firm into the top three mobile giants globally.
Sprint shares surged 14.3 percent to close at $5.76 in U.S. trade Thursday.
“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,” said a Sprint statement.
A pedestrian passes in front a Sprint Nextel Corp. store in New York. (Bloomberg)
“Sprint does not intend to comment further unless and until an agreement is reached.”
On Friday, Softbank also confirmed the talks about buying a controlling stake in Sprint, the third-biggest U.S. carrier.
The Japanese carrier has entered into large deals before, buying the struggling Japanese arm of Vodafone in 2006 for about 1.75 trillion yen.
Earlier this month, Softbank said it would acquire smaller rival eAccess Ltd for $2.3 billion.
Japan’s leading Nikkei business daily reported Friday that Softbank was also eyeing fifth-ranked U.S. carrier MetroPCS Communications. Softbank declined to comment on that potential deal.
Acquiring the two firms could carry a price tag as high as 2.0 trillion yen ($25.5 billion) and would make Softbank the world’s No. 3 mobile player, putting it just behind China Mobile and U.S.-based Verizon Wireless.
The Japanese firm plans to buy more than two-thirds of Sprint’s outstanding shares, but a sharp jump in Sprint Nextel’s share price could derail the acquisition plan, it added.
“The scale of the Sprint deal is massive, and frankly, difficult to fully dissect at this point,” said Toshiyuki Kanayama, market analyst at Monex.
Kenji Shiomura, strategist at Daiwa Securities, said: “Investors were discouraged by the possibility that the company could be saddled with a heavy financial burden.”
“Putting aside the point of whether the deal could be successful in the long run, the market is cautious.”
He noted that any new share issue to finance the deal could dilute the value of existing Softbank stock, a move likely to worry investors.
“We are still looking for details of the deal and where the synergies will lie,” said Shinkin Asset Management fund manager Naoki Fujiwara.
“The debt burden is a concern ... The scale of the prospective deal is bold, and if successful it will significantly raise Softbank’s revenue and status.
“But the cost-effectiveness of the strategy, as well as details of the financing, will be closely watched,” he added.