Mobile phone carrier Sprint Nextel Corp. (S) and Japan's third-largest mobile carrier SoftBank Corp. (SFTBY) have Monday amended the previously announced merger agreement between them that will see a sweetened cash consideration and increased certainty to Sprint shareholders. Sprint will now adjourn the June 12 shareholder meeting until June 25. The deal is expected to close in early July 2013.
The amended merger agreement has the unanimous approval of Sprint's special committee and board of directors. The board has also unanimously recommended shareholders to vote in for of the revised SoftBank deal.
Additionally, the special committee unanimously determined that the preliminary $25.5 billion proposal floated by satellite TV provider Dish Network Corp. (DISH) is not reasonably likely to lead to a 'superior offer.' The special committee has also ended its discussions with Dish due to lack of progress with Dish and the improved terms from SoftBank. Dish is now given a deadline of June 18 to provide its 'best and final' offer.
However, Dish said in a statement earlier in the day that it continues to negotiate the terms of a merger agreement with Sprint. Meanwhile, a statement released by Dish following the amended agreement stated that, "We continue to believe that Sprint has tremendous value. We will analyze the revised SoftBank bid as we consider our strategic options."
The amendment in the Sprint-SoftBank deal is seen as a move to thwart the unsolicited bid from Dish, which floated a rival bid to acquire 100 percent of Sprint for $25.5 billion on April 15 that includes a cash consideration of $17.3 billion and $8.2 billion in stock.
"Our transaction offers significant value for Sprint stockholders and the opportunity to realize that value in just a few weeks, without the risks associated with any other potential transaction," SoftBank Chairman and CEO Masayoshi Son said in a statement.
According to the amended merger agreement, SoftBank has raised its cash consideration payable to Sprint shareholders at closing by $4.5 billion, which will bring the total cash consideration available to Sprint shareholders to $16.64 billion.
SoftBank had earlier agreed to pay around $12.1 billion in cash to Sprint shareholders and to invest $8 billion of new capital for various purposes, including strengthening of Sprint's balance sheet.
SoftBank has now reallocated $3 billion from the $8 billion proposed capital investment towards cash payment to shareholders along with $1.5 billion of incremental capital from SoftBank. This will now raise the cash per share available to shareholders by $1.48 to $5.50 per share from $4.02.
It will also then raise the total cash and stock per share offer price to Sprint shareholders from the earlier $7.30 to $7.65, representing a significant 52 percent premium over Sprint's unaffected trading price prior to announcement in October 2012.
According to the amended merger agreement, Sprint stockholders will have an equity ownership of 22 percent in a stronger, more competitive New Sprint at closing, while SoftBank will own about 78 percent.
Additionally, the amended agreement call for redefining the definition of "superior offer" to exclude any proposal that is not fully financed pursuant to binding commitments from recognized financial institutions. It also requires Sprint to adopt a shareholder rights plan, and increase the non-refundable termination fee payable by Sprint to SoftBank in certain circumstances to $800 million from $600 million.
S closed Monday's regular trading session at $7.18, down $0.06 or 0.83% on a volume of 38.02 million shares. However, the stock gained $0.14 or 1.95% in after-hours trading.
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