Japan's SoftBank Corp cleared a major hurdle in its attempt to buy U.S. wireless provider Sprint Nextel Corp, as rival bidder Dish Network Corp declined to make a new offer after SoftBank sweetened its own bid last week.
SoftBank (Tokyo, Japan) Chief Executive Masayoshi Son is now a step closer to sealing the largest overseas acquisition by a Japanese company in history, after winning support from a key shareholder by raising SoftBank's offer to $21.6 billion from $20.1 billion last week.
Son, a rare risk-taker in a cautious Japanese corporate environment, has been determined to thwart a rival bid from Dish (Meridian, CO, USA) - led by Chairman Charlie Ergen, known for aggressive takeover attempts - in an effort to break into the U.S. market.
"We look forward to receiving the FCC (Federal Communications Commission) and shareholder approvals which will allow us to close in early July and begin the hard work of building the new Sprint into a meaningful 3rd competitor in the US market," Softbank said in a statement.
SoftBank, one of Japan's top mobile operators, has promised that Sprint (Overland Park, KS, USA) would be able to save money on equipment such as smartphones by getting bulk-buy discounts from vendors. It can also lend its expertise in wireless technology, an area in which Son has said Dish's Ergen has no experience.
"The advantage of SoftBank is really about the synergy between the two firms ... in terms of distribution, branding and retailing," said Hiroshi Yamashina, a senior telecommunications analyst at BNP Paribas in Tokyo.
Dish's promise was additional wireless spectrum that it has bought in recent years as well as the opportunity to expand its video services to cellphone users.
Shares of SoftBank rose 4.2 percent in Tokyo, outpacing a 1.8 percent rise in the benchmark Nikkei average.
Satellite TV provider Dish said it was unable to meet Sprint's deadline because of changes the wireless company made in its agreement with SoftBank, such as higher break-up fees that raised the hurdles for a Dish deal. However, the company said it was still considering its options and "continues to see the value in a merger with Sprint."
Dish said it would now focus on its tender offer for Clearwire Corp (Bellevue, WA, USA), threatening to disrupt Sprint's own takeover bid for the broadband provider. Sprint needs Clearwire's valuable wireless airwaves for its planned high-speed network upgrades.
Clearwire's board recommended last week that its shareholders vote against Sprint's $3.40 per share offer at a June 24 meeting and instead urged them to accept Dish's tender offer to buy Clearwire shares for $4.40 each.
Sprint has filed a lawsuit against Dish and Clearwire over the Dish offer and Clearwire's recommendation.
"Because Sprint owns a 51 percent stake in Clearwire, it's hard to see how Dish's proposal could get through in the shareholders' meeting," said Tetsuro Tsusaka, a telecommunications analyst at Morgan Stanley MUFG in Tokyo.
Some analysts have said that if Dish fails to win Sprint, it could use a minority ownership of Clearwire as a bargaining chip to help it forge an agreement with SoftBank either to buy spectrum or to create a network partnership.
While SoftBank has said that it would be happy for Sprint to just own a minority stake in Clearwire, it would forgo savings and some control if Clearwire retains independence with a separate board and network.
Son has pursued his quest of becoming the top mobile provider in Japan with a clutch of acquisitions, including Vodafone's ailing Japan arm in 2006. He now sees Sprint as a springboard into the United States, where the two most dominant players are Verizon Communications Inc (New York City, NY, USA) and AT&T Inc (Dallas, TX, USA). SoftBank and Sprint are currently both ranked third in their respective countries.
"I am determined to be No. 1 in the world very soon in our own industry. You are lucky not to be my competitor," he told a consumer goods conference in Tokyo on June 14.
SoftBank was forced to raise its bid for Sprint on June 10 after Sprint shareholders said they preferred Dish's offer. It promised to pay shareholders $7.65 a share, up from the previous offer of $7.30.
The revised deal would give SoftBank 78 percent ownership of Sprint compared with a 70 percent stake under its earlier offer. However, the deal provides $3 billion less direct capital investment in Sprint itself than the previous offer.
"Perhaps the reason Sprint didn't care so much about a smaller capital injection is that they really have the conviction that their cash flow will be improved enough by the deal," said Yamashina of BNP Paribas.
"If SoftBank hadn't bumped up the shareholder part, there was a chance they wouldn't have been able to please shareholders like Paulson."
Paulson & Co, Sprint's second-biggest shareholder, has already said it would vote for the latest SoftBank deal but other Sprint shareholders have said they wanted to hear Ergen's response before making a decision on the latest bid.
Sprint shares fell 11 cents, or 1.5 percent, to $7.21 in after-hours trading, suggesting that at least some shareholders appeared to lose hope for a higher bid after Dish's statement.
Sprint declined to comment on the Dish statement.
(Additional reporting by Greg Roumeliotis, and Jonathan Stempel in New York; Editing by Bernard Orr, Diane Craft and Chris Gallagher)