SoftBank Corp is playing it rough in its attempt to keep Dish Network Corp from breaking up its $20.1 billion deal to take control of Sprint Nextel Corp.
The Japanese telecom company, which owns 33 percent of Alibaba Group Holding Ltd (Hangzhou, China), has told banks that their financing of Dish's $25.5 billion rival offer for Sprint (Overland Park, KS, USA) could hurt their chances of landing a role in a highly anticipated public offering of the Chinese e-commerce giant, two sources familiar with the situation said.
SoftBank (Tokyo, Japan), Dish (Meridian, CO, USA) and Sprint declined to comment. A source close to Alibaba said on Friday that while SoftBank is a major investor, it does not make decisions for Alibaba's management. Alibaba has no timetable for an IPO yet and has not hired underwriters.
Softbank's unusual move is the latest sign that the battle for the control of Sprint, the No. 3 U.S. wireless carrier, is fast turning into a no-holds-barred brawl between Softbank founder Masayoshi Son and Dish's Charlie Ergen.
SoftBank agreed in October last year to buy 70 percent of Sprint for $20.1 billion. In December, Sprint also made an offer to buy out the stake in Clearwire Corp (Bellevue, WA, USA) it didn't already own. But Softbank's plans have run into trouble, thanks in large part to Dish. In January, Dish made a counterbid for Clearwire, and followed up in April with the bid for Sprint.
Softbank's latest move could make it more difficult for Dish to firm up financing for its Sprint bid. At least one major bank has withdrawn from financing the Dish bid after Softbank's move, the sources said.
Dish has said it would need to raise $9 billion in debt to finance the offer, and
Softbank has criticized its rival for not having committed financing in place.
In an interview last month, Son described the U.S. media veteran as an "amateur" in mobile. "Charlie has no expertise in the mobile industry," the executive told Reuters.
For his part, Ergen has fought back against the criticism. Earlier this month, he said acquiring Sprint was so important to Dish that he could consider selling the company altogether if he loses a bidding war.
Softbank's move, though unusual, is legal, the sources said.
So-called anti-tying rules prohibit banks from offering a product to a company on the condition that it gets a role in another transaction. For example, a bank cannot say it will only give a loan to a company if the bank is chosen as an adviser on the company's next M&A transaction.
But banks' corporate clients are not subject to these restrictions. A company, for example, may select underwriters for an IPO on the condition that these banks not participate in a competitor's future public offering.
Alibaba's IPO, which could come as early as this year, is one of the most highly anticipated technology deals after Facebook Inc's (Menlo Park, CA, USA) $16 billion offering last year and would generate lofty fees for Wall Street banks. In Facebook's case, underwriters split about $176 million in fees.
BANKS TIED UP
Dish is in the process of lining up financing, but is encountering challenges in part because of Softbank's move, the sources said.
Barclays Plc, which is advising Dish, and Jefferies Group LLC, are lined up to provide financing, with Dish speaking to more banks to join the financing, one of the sources said. Jefferies and Barclays declined to comment.
Many Wall Street banks including Bank of America Corp, Citigroup Inc, UBS AG and Deutsche Bank are already conflicted and cannot provide financing to Dish because of their roles in other aspects of the bidding war.
Bank of America is advising Sprint's special committee, while Citigroup, UBS and Rothschild are advising Sprint. Deutsche Bank is financing SoftBank's proposal.
Meanwhile, Softbank has already removed Barclays from a role in financing its bid for Sprint after the British bank was revealed to be advising Dish on a rival offer, sources have said previously.
Dish's lack of committed financing is a concern for the special committee of Sprint's board that is reviewing Dish's offer to determine whether it could lead to a better deal than Softbank's, the sources said.
Ergen said on Thursday that Sprint's special committee has not yet given Dish access to its data room to gain a closer look at Sprint's books. The committee is taking its time in part because Dish does not have committed financing, the sources said.
In a letter to Sprint's board of directors on April 15, Dish said it intended to fund the $17.3 billion cash portion of the deal using $8.2 billion in balance sheet cash and raising $9 billion in additional debt financing.
"We have a proven track record in raising capital to fund strategic initiatives and have received a Highly Confident Letter from our financial advisor, Barclays, confirming our ability to raise the required financing," the letter said.
(Reporting by Soyoung Kim, Olivia Oran and Sinead Carew in New York; Editing by Paritosh Bansal, Matthew Lewis and Paul Simao)