* Could be largest Japanese acquisition in U.S. ever
* Nikkei says Softbank would also pursue MetroPCS
* Deal could lead to Sprint buying Clearwire - analysts
* Sprint, Clearwire soar in afternoon trade; MetroPCS down
By Taro Fuse and Sinead Carew
TOKYO/NEW YORK, Oct 11 Japanese wireless service
provider Softbank Corp is looking to buy roughly 70
percent of Sprint Nextel Corp in a bold move that would
make it a major player in the U.S. mobile market.
But Softbank's ambitions may not stop with Sprint, which
might also be looking to buy out its partner, Clearwire Corp
. The Japanese company might also be aiming to use
Sprint as a vehicle to make a run at smaller Sprint peer
MetroPCS Communications Inc, a two-step transaction that
would potentially cost more than 2 trillion yen ($25.55
billion), according to a Nikkei report.
That would make it the biggest overseas acquisition by a
Japanese company ever and vault Softbank into the upper echelons
of wireless carriers worldwide.
In response to reports of a pending deal, Sprint said on
Thursday that it was in talks with Softbank on a "potential
substantial investment" that could involve a change in control
of the U.S. company. It said there was no assurance of a sale.
Softbank is eyeing a controlling stake in Sprint worth more
than 1 trillion yen ($12.8 billion) and is in talks with several
banks to borrow money to finance a bid, according to a source
with direct knowledge of the matter.
A second source familiar with the situation, who would not
speak on the matter publicly, said Softbank was after a stake of
roughly 70 percent, which it could achieve by buying some newly
issued shares directly from Sprint and tendering for the rest.
By raising some new equity directly, Sprint would be able to
shore up its balance sheet and potentially fund other deals such
as a buyout of Clearwire in which it already holds roughly 48
Sprint shares rose as much as 19 percent on Thursday to
levels not seen since the summer of 2011, on the heaviest
trading volume in the stock's history. The stock ultimately
closed 14.3 percent higher at $5.76 on New York Stock Exchange.
The shares of Clearwire, which could play a key role in any
deal, closed almost 71 percent higher at $2.22. Clearwire, which
has been looking for new sources of funding, has said that it
has enough money until at least the middle of 2013.
It declined to comment on Thursday and its chief financial
officer pulled out of a conference presentation at the last
minute without an explanation.
A major Sprint investor said any Softbank investment should
be used to buy out the rest of Clearwire, to give Sprint
attractive wireless spectrum assets and to speed up Clearwire's
upgrade of its wireless network with faster data speeds.
"I just don't think there's any deal unless it involves
Clearwire. I don't think you'd see one without the other," said
Daniel Martino, a fund manager at T. Rowe Price, which owned
47.2 million Sprint shares as of the end of June.
Sprint, whose market capitalization was $15.12 billion at
Wednesday's market close, is the third-largest U.S. carrier,
with more than 56 million users at the end of June, even after
losing customers for years.
As for Softbank, Sprint might be its only option for an
entrance into the U.S. market, according to analysts.
"In terms of (Sprint) standalone, we believe the asset
represents the only way for a potential new entrant to get a
national presence immediately in the U.S.," Wells Fargo analyst
Jennifer Fritzsche wrote in a note to clients.
The Softbank news comes just days after a source told
Reuters that Sprint has been considering bidding for MetroPCS,
which agreed this month to merge with Deutsche Telekom AG's
MetroPCS shares fell sharply at the open, turned positive in
but then fell again, ending down 3.3 percent at $11.64.
The atmosphere was calm at Sprint headquarters in Overland
Park, Kansas on Thursday, all of the chatter aside.
"This will be interesting to see if it happens; if it has
legs," said one longtime Sprint manager who did not want to be
named. "There are always a bunch of rumours. Something like this
is always a possibility when your stock price is so low."
A third source familiar with the situation, who declined to
speak publicly about the matter, said Softbank has been
exploring ways to get into the U.S. market since this summer, as
it sees opportunities for growth here that would help offset a
stagnating market in Japan.
Founded and led by Masayoshi Son - Japan's second-richest
man, according to Forbes - Softbank has grown from a packaged
software distributor 30 years ago into a broad
telecommunications group worth more than $40 billion.
"He's the definition of patient capital," Martino of T. Rowe
But it faces tougher competition at home against the likes
of KDDI Corp and NTT Docomo.
Japanese media said buying Sprint - which competes in the
United States against Verizon Wireless and AT&T
Inc - would also make it cheaper for Softbank to procure
smartphones and other mobile devices.
Benjamin Powell, a former general counsel to the director of
national intelligence now in private practice at WilmerHale,
said the deal was very likely to require a government review
because it involved sensitive telecommunications networks. But
several analysts said regulators were likely to eventually look
favourably on a deal.
Japanese companies made a record 642 cross-border deals last
year, according to Thomson Reuters data. Buoyed by a stronger
yen, the value of all overseas deals rose to $69.5
billion, up 81 percent from 2010, also a record.