Wireless provider, Sprint Nextel Corporation announced that they plan to sell a major percentage of stock to major Japanese cell phone provider Softbank.
Tokyo based company, Softbank stated on Monday that they will be purchasing $8 billion of shares from Sprint and an additional $12.1 billion of shares from the market. The Acquisition would make Softbank owner of 70% of Sprint stock, and leave the shareholders with the remaining 30%. The deal will result in 55% of current Sprint shares to be exchanged for $7.30 per share in cash, and the remaining shares to be converted into new publicly traded entity. Completion of the deal is expected to be in mid 2013.
This acquisition, would allow Softbank to enter the US market, with hopes of making the company one of the largest telecom companies worldwide. In addition, the deal could put them in a better position to compete with their largest competitors Verizon (VZ) and AT&T (T).
Analysts at Jefferies weighed in this morning, upgrading Sprint from a “Hold” to “Outperform.” On the contrary, Moody’s is considering a possible downgrade for Softbank.
The deal has already been approved by the Board of Directors in both companies, and is now subject to stockholder and customary regulatory approval.
While Sprint currently does not pay a dividend, it’s two major competitors VZ and T do. Stock’s of Verizon and AT&T were both down by 1.4% and 0.5% when the acquisition was announced Monday morning. However, the two companies account for 75% of the US telecom providers, while Sprint only accounts for 15%. At this time, there is no indication that this deal will do major harm to VZ and T.
Sprint shares were up 2 cents or 0.35% to $5.75 Monday morning.