The fight for Sprint Nextel’s hand looks to have just gone personal as Japan’s Softbank returned fire in its attempt to purchase a controlling stake in the U.S. industry’s No. 3 operator. That attempt is being challenged by Dish Networks, which is controlled by its co-founder and chairman Charlie Ergen.
In backing the claim that its bid was superior to that of Dish, Softbank laid out a number of numbers, as well as a dig at Dish’s corporate structure. In comparing the “governance” structure of their respective companies, Softbank labeled its as “shareholder protection” while Dish was “Ergen-dominated.”
As for the numbers, Softbank released a report today highlighting what it called 11 key areas as to the superiority of its proposed $20.1 billion purchase of a 70% stake in Sprint Nextel, that it claims equates to a 21% premium over the Dish Networks offer, which Dish valued at $25.5 billion for a 68% stake. Those advantages include less leverage for the combined operations and a superior capital structure that will allow Sprint Nextel to continue unhindered with its current network upgrade program. Softbank claims that its leverage, or debt ratio, when combined with Sprint Nextel will be at 3x compared with 5.9x if Sprint Nextel were to accept Dish’s offer.
Softbank noted in its presentation that Dish’s offer was “incomplete and illusory,” putting the value of its offer at $7.65 per share compared with a value of $6.31 per share for Dish’s offer. And at what it called “present value, pre synergies,” Softbank said its offer was still a 5% premium compared with the Dish offer.
You can view a press conference held by Softbank Chairman and CEO Masayoshi Son talking about the deal here.
Softbank also cited advantages in the timing of the respective deals, noting it was on track to close the deal by mid-year, while the Dish proposition would need another year. Softbank also questioned Dish’s financing sources as well as its lack of experience in running a mobile operation.
However, in laying out the superiority of its offer, Softbank also steered clear of sweetening its bid, and instead stuck with the terms of its original deal. Dish has become somewhat desperate to make a move into the wireless telecommunications space after it was granted access to 30 megahertz of spectrum in the 2 GHz band in order to operate a cellular network. The cost of attempting to build out its own network appears to be driving Dish into a partnership with an established carrier in order to meet build out requirements for that spectrum at a reasonable cost.
Just yesterday Softbank allowed Sprint Nextel to proceed with discussions with Dish regarding Dish’s proposal.
Analysts have noted that the Softbank deal is likely more palatable to Sprint Nextel shareholders for many of the reasons cited by Softbank, but that they expected Softbank to have to eventually bolster its offer in order to garner approval.
“All things being equal, we believe the majority of Sprint holders would prefer a deal with SoftBank than with Dish, and would rather own 30% of Sprint at 3.2x leverage than own 32% of Dish/Sprint at [approximately]-5x leverage,” noted Macquarie Equities Research in a recent report.
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