SoftBank Corp has asked investment banks not to finance a rival bid for Sprint Nextel Corp by Dish Network Corp, saying this could hurt the banks' chances of gaining a role in the highly anticipated public offering of Alibaba Group Holding Ltd, according to two people with knowledge of the matter.
Japanese telecom company SoftBank, which is a big shareholder in Chinese e-commerce company Alibaba with a 33 percent stake, is locked in an escalating bidding war with Dish, after the U.S. satellite TV provider made a $25.5 billion proposal for Sprint in April.
SoftBank, which has an existing agreement with Sprint to buy 70 percent of the U.S. wireless carrier for $20.1 billion, has heavily criticized Dish's offer, saying the rival bid does not have committed financing in place.
Dish, which has said it would need to raise $9 billion in debt to finance the offer, is in the process of lining up financing, but is encountering challenges partly because banks have come under pressure from SoftBank to avoid any financing of Dish, the people said on Friday.
At least one major Wall Street bank has withdrawn from financing the Dish bid because of the bank's relationship with SoftBank and its likely role in the Alibaba IPO, they added.
Alibaba declined to comment, but a third source, who is close to the e-commerce company, said that while SoftBank is a major investor, it does not make decisions for Alibaba management. Alibaba has no timetable for an IPO yet and has not hired underwriters.
Sprint, SoftBank and Dish declined to comment.
So-called anti-tying rules prohibit a bank from offering one product to a company on the condition that it gain 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. For instance, a company 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 offerings after Facebook Inc's $16 billion offering last year and would generate lofty fees for Wall Street banks.
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 people said.
Jefferies and Barclays declined to comment.
If Dish finds it difficult to secure financing, that could put the proposed deal in jeopardy.
The 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 superior proposal, people familiar with the matter said.
Dish founder and Chairman Charlie Ergen said on Thursday that Sprint's special committee has not yet allowed Dish to view its data room to gain a closer look at Sprint's books. The committee is dragging its feet partly because Dish does not have committed financing, people familiar with the matter said.
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.
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 Gary Hill and Matthew Lewis)