SoftBank Corp. (TYO: 9984) shares rose nearly 10 percent in Tokyo on Tuesday in heavy trading after the stock price lost nearly 20 percent since it announced it would acquire a controlling interest in Sprint-Nextel Corp. (NYSS: S) of the U.S.
Shares of SoftBank closed at 2,485 yen (US $31.50).
In the proposed $21 billion deal, the Japanese telecommunications and content provider plans to buy a 70 percent stake in the No. 3 U.S. mobile services provider that has been struggling since its 2005 takeover of Nextel. Sprint reported a lost $2.9 billion loss last year.
The deal would make SoftBank a leading global mobile services provider with a major U.S.-based asset. Once the deal is closed by the second quarter of next year, the Tokyo-based company will have about 90 million subscribers.
Investors began selling SoftBank shares after news of the deal was reported on Thursday. The stock rebounded Tuesday on bargain hunting, despite an imminent possible downgrade to SoftBank’s credit rating by Moody’s citing concerns about how much debt the company will incur.
Shares of Sprint, of Overland Park, Kan., have gained 13 percent since Thursday. They closed Monday at $5.69. They were flat in premarket trading Tuesday in New York.
Here's what some market watchers have said about the deal:
- "This has the potential to transform the SoftBank Group into a behemoth straddling Japan, the U.S. and Asia," Credit Suisse analyst Hitoshi Hayakawa told Dow Jones Newswires. "This opening for industry realignment on a historic scale presents an excellent opportunity to invest."
- “Almost any other deal outside of Verizon Wireless and AT&T Mobility will likely have little issues getting regulatory approval,” Christopher King, an analyst Stifel Nicolaus, wrote in a research note, referring to the U.S. Justice Dept.’s and Federal Communications Commission’s concern that the top two mobile services providers are getting too big and could use an outsider to compete against them.
- "Clearwire (Nasdaq: CLWR) is a critical resource for Sprint," Charles Golvin, an analyst at Forrester Research, told USA Today. Clearwire, based in Bellevue, Wash., is a wholesale wireless broadband provider partially owned by Sprint, which could be wholly acquired with the capital injection from Tokyo to help it become more competitive in next-generation mobile broadband.
- "They are taking on an intelligent shareholder that is going to make their opinions known and drive their views on the board," Charles Giancarlo, a private-equity investor at Silver Lake Partners, told the Wall Street Journal, referring to the new 10-member board made up mostly of SoftBank-appointed members that will control Sprint.