By Sinead Carew
NEW YORK Oct 18 Japan's SoftBank Corp
said on Friday it had agreed to pay $1.26 billion for a 57
percent stake in privately held cellphone distributor Brightstar
Corp as it looks to boost its bargaining power with handset
SoftBank, which owns 80 percent of No. 3 U.S. mobile
operator Sprint Corp, said that under the agreement its
ownership of Brightstar would increase to 70 percent over the
next five years, or upon certain unspecified events.
SoftBank, which is valuing Brightstar at $2.2 billion, had
announced earlier this week it was in talks with the company,
which delivers phones, tablets and accessories from
manufacturers to wireless operators and retailers.
SoftBank's billionaire founder, Masayoshi Son, has said that
buying Sprint would allow SoftBank, which also runs a mobile
network in Japan, to buy phones in bigger volumes and avail of
discounts from an industry dominated by Samsung Electronics Co
Ltd and Apple Inc.
As part of the deal, the companies said that a buying &
innovation division in Brightstar would realize savings and
efficiencies for SoftBank, Sprint, and Brightstar. Under the
agreement, Brightstar will become the exclusive provider of
handsets to certain SoftBank affiliates.
By combining the buying power of Brightstar's customers in
50 countries with that of SoftBank's various telecom affiliates,
Brightstar would become a buyer of $20 billion worth of mobile
equipment and services per year according to a person familiar
with the deal who asked not to be named.
"When you have that level of buying power it puts you at the
table, not just from a savings perspective, but also when device
manufacturers want to talk to you about the latest and greatest
products," said the person who hopes the deal will start to
level the playing field with bigger operators and SoftBank.
However, it was not immediately clear how the deal might
affect existing partnerships at Brightstar which lists Sprint's
three biggest rivals Verizon Wireless , AT&T Inc
and T-Mobile US as customers. T-Mobile declined
to comment for the story and AT&T and Verizon did not respond.
Analysts said there appeared to be a big risk that
Brightstar's three big US customers could take their business
elsewhere rather than partner with the company which would have
the same majority owner as No. 3 U.S. mobile provider Sprint.
IDC analyst John Jackson suggested that SoftBank may try to
create some benefit from the deal for Sprint's rivals too.
"I would certainly think the existing Brightstar customers
will want to review their situation," said Jackson. But he
added, "None of this will have been lost on SoftBank. The whole
model falls down without the scale of the other operators."
Brightstar generated earnings before interest, taxes,
depreciation and amortization of about $260 million on revenues
of more than $7 billion for the 12 months ended June 2013, the
Brightstar founder and Chief Executive Marcelo Claure will
initially retain 43 percent ownership in the company but his
ownership will decline as SoftBank increases its stake.
The Brightstar transaction, which has been approved by
SoftBank's board, will be subject to regulatory approval,
according to the companies which expect to close the deal by the
end of 2013.
SoftBank said it is financing the deal with $1.26 billion in
cash on hand and intends to guarantee Brightstar's outstanding
$350 million senior unsecured notes due 2016 and $250 million
senior unsecured notes due 2018.
Earlier this week, SoftBank also said it spent $1.5 billion
for a 51 percent stake in Finnish mobile games maker Supercell,
valuing the small maker of hit games "Clash of Clans" and "Hay
Day" at $3 billion.
Goldman, Sachs was financial adviser to Brightstar, and
Cleary Gottlieb Steen & Hamilton LLP and K&L Gates LLP served as
legal counsel. The Raine Group LLC advised SoftBank and Morrison
& Foerster LLP acted as lead counsel to SoftBank.