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Largest Acquisition by a Japanese Company Announced


Softbank Corp President Masayoshi Son (L) shakes hands with Dan Hesse, president and CEO of the Sprint Nextel Corporation, in Tokyo, October 15, 2012.

Softbank Corp President Masayoshi Son (L) shakes hands with Dan Hesse, president and CEO of the Sprint Nextel Corporation, in Tokyo, October 15, 2012.

Mobile phone service provider Softbank has announced what would be the largest-ever foreign acquisition by a Japanese company. It intends to purchase Sprint, the number three telecommunications company in the United States, in a $20 billion deal.

Softbank's acquisition of Sprint will create one of the world's largest telecommunications operators.

Both are number three in their respective markets and the combination will create a trans-Pacific company with more than 90 million customers.

The deal, approved by the boards of both companies, was officially unveiled at a hastily-arranged news conference in the Japanese capital.

Softbank is to purchase 70 percent of Sprint Nextel Corporation in a deal financed by three Japanese financial groups and Deutsche Bank.

Softbank founder Masayoshi Son acknowledged it is a risky deal, saying it would only be safe if he did nothing.

Son said the challenge in the United States will not be easy. But his company must enter a new market, one with a different culture and start again from zero after all that it has built.

Son said he will assume the chairmanship of Sprint, which will be a Softbank subsidiary, but said he wants Sprint's chief executive officer Dan Hesse to stay in his job.

Hesse took over Sprint five years ago. “My goal has always been the same," he said. "And it is to create the best wireless carrier in America. I believe without question that we are going to get there and the catalyst to get there is our partnership with Softbank.”

The two companies have a combined debt of $25 billion. The ratings-firm Moody's immediately announced it was looking at downgrading Softbank's credit rating.

Shareholder concern about the deal sent Softbank shares tumbling more than five percent in Tokyo trading. Softbank has lost a fifth of its value, or nearly $9 billion, since news of the deal first leaked last week. But Sprint's stock price has gone up.

Softbank said the deal, following shareholder approval and regulatory review, is expected to be completed by the middle of next year.

Analysts said it makes sense for Softbank to go abroad because of market stagnation in Japan, which has a declining and aging population. The U.S. telecommunications market, on the other hand, is expanding.

Sprint, which has been losing money for years, is in a fierce battle for U.S. market share behind AT&T and Verizon.

The 55-year-old Son, known as a maverick in the Japanese business world, is an ethnic Korean who grew up poor in western Japan before moving to the United States at the age of 16 to finish high school. He is now one of the richest people in Japan.

Over the past couple of decades he has led a series of high-profile acquisitions and investments, including with Yahoo Japan, Vodafone Japan and the Chinese e-commerce company Alibaba.

But previous attempts by Japanese telecoms players to venture abroad have not gone well. Industry giant NTT Docomo incurred huge losses with investments in AT&T Wireless and KG Telecom of Taiwan.
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