Softbank forges Sprint takeover deal

Japanese wireless services company Softbank Corp. on Monday unveiled an agreed, $20.1 billion offer for Sprint Nextel Corp. after weeks of talks and amid a whirlwind consolidation of the U.S. cellular market.

In a complex transaction, Softbank will offer Sprint shareholders either $7.30 in cash -- a 27.3% premium to Friday's closing price -- or stock in a new Sprint entity for their Sprint shares. Softbank will also pump an additional $8 billion into Sprint as part of the deal, stoking speculation the combined group could then launch an offer for MetroPCS Communications Inc. or buy the 49.7% of Clearwire Corp. it doesn't already own.

In total, $12.1 billion of proceeds will flow to Sprint Nextel shareholders, while the $8 billion investment will give Softbank new shares in the company, translating into a total stake of 70%.

"This transaction provides an excellent opportunity for Softbank to leverage its expertise in smartphones and next-generation high-speed networks, including LTE, to drive the mobile Internet revolution in the world's largest market," Softbank chairman and CEO Masayoshi Son said in a statement.

To buy MetroPCS, Softbank would have to compete with an existing offer from Deutsche Telekom AG's T-Mobile USA Inc. T-Mobile, the No. 5 cellular company in the U.S., has been desperate to bulk up and become more competitive but had an agreement to be bought by AT&T Inc. thwarted by regulators last year.

Softbank said if either side called off the deal it would owe the other $600 million as a breakup fee. The Japanese company said it had already arranged financing for the deal with Mizuho Corporate Bank Ltd., Sumitomo Mitsui Banking Corp., Bank of Tokyo-Mitsubishi UFJ Ltd. and Deutsche Bank AG.

Softbank said Sprint CEO Dan Hesse would retain his position following the deal.

"Our management team is excited to work with Softbank to learn from their successful deployment of LTE in Japan as we build out our advanced LTE network, improve the customer experience and continue the turnaround of our operations," Hesse said in a statement.

The executive has been laboring to unwind the scars left on Overland Park, Kan.-based Sprint by the $35 billion acquisition of Nextel engineered by his predecessor in 2005. The company is rolling out its next-generation, long-term evolution broadband network in a raft of U.S. cities. Cellular companies are scrambling to add capacity to their networks to accommodate the boom in smartphones.

LTE is the same technology used by Softbank in Japan and also Sprint's Clearwire.

Chris King of Stifel, Nicolaus & Co. noted in a Monday report that the investment from Softbank would transform Sprint's levered balance sheet. However, he questioned the $7.30 per share valuation.

"While we have a difficult time justifying Sprint's implied valuation related to the transaction," King wrote, "we note Softbank has access to virtually unlimited capital at low interest rates in the current Japanese macro-economic environment, with a CEO that holds a well-known 300-year time horizon, which is likely helpful with Softbank's stock down over 20% in the past two trading days as the company is effectively tripling its debt position to finance the transaction."

Softbank investors marked the Japanese company's shares down 5.4%, or ¥127, Monday to ¥2,268. At that price Softbank has a market value of ¥2.51 trillion ($31.9 billion).

Softbank is taking financial advice from Raine Group LLC, Mizuho Securities and Deutsche Bank. It's turning to a Morrison & Foerster LLP team led by Ken Siegel in Tokyo and Robert Townsend in San Francisco, Mori Hamada & Matsumoto, Dow Lohnes PLLC, Potter Anderson Corroon LLP and Foulston & Siefkin LLP for counsel.

Citigroup Global Markets Inc., Rothschild and UBS Investment Bank are acting as financial advisers to Sprint, with Skadden, Arps, Slate, Meagher & Flom LLP's Thomas Kennedy, Jeremy London, Yossi Vebman, Stephanie Teicher, Steven Sunshine, Regina Olshan, Dean Schulman, Ivan Schlager, Toni Cook Bush and Matthew Hendrickson; Lawler, Metzger, Keeney & Logan LLC; and Polsinelli Shughart PC acting as counsel.

-- Chris Nolter contributed to this report.