The boards of the both companies have reportedly approved the deal, according to CNBC. The deal would give Sprint $8 billion in exchange for stock directly from the company, while $12 billion will be used to buy from stockholders.
The offered price per share during the time of the negotiations was reportedly $7.30 or a 27 percent premium over the carrier’s closing stock price last Friday of $5.73.
Sprint is yet to give any official comment about the supposed deal.
The U.S. wireless carrier had previously announced that it was in a discussion with Softbank about a possible investment opportunity the company needs badly.
Softbank’s assist will boost Sprint’s financial quagmire. Sprint posted a $1.73 billion loss during the second quarter and it expects to report another operating loss during the third quarter. Observers think that the combined resources of Sprint and Softbank can benefit the customers in general as it would mean better variety of phones, better service, and more competitive plans. This would also add a more robust competition in the industry as Sprint rivals with T-Mobile USA, AT&T, and Verizon Wireless.
The move by Softbank is, so far, the second majority acquisition in the industry. Deutsche Telekom announced this early October that it is planning to purchase Metro PCS and merge with T-Mobile USA. After the announcement, Sprint also announced its intention to bid for MetroPCS and merger with T-Mobile.
Enjoying 30.5 million subscribers, Softbank is one of the biggest wireless carriers in Japan. The company is said to have 2.3 billion in capital, according to its corporate website.
The deal with Sprint is yet to be finalized by both companies according to people familiar with the case. However, there are possible challenges that they may encounter including a U.S. government approval that is necessary if a foreign firm wants to acquire a business with national-security implications.
The investment from Softbank follows Sprint’s disastrous acquisition of Nextel in 2005. Currently, Sprint is still struggling to compete with AT&T and Verizon, which own the big bulk of the industry’s customer base.
Sprint is also poised to take control of Clearwire Corp., a financially weak wireless network that Sprint owns a large stake, people familiar with the case said.
Dan Heese, Sprint’s CEO, said that his company needs to reach significant deals to make it stronger to compete in the wireless business.
On the other hand, buying 70% of Sprint is a golden opportunity for Softbank Chief Executive Masayoshi Son to buy other businesses in the United States wireless industry.