Shares of Softbank Corp (PINK:SFTBF) (TYO:9984) declined Tuesday to their lowest level in six months in the Tokyo Stock Exchange, as investors feared that DISH Network Corp (NASDAQ:DISH)’s bid for Sprint Nextel Corporation (NYSE:S) may scuttle the Softbank Corp (PINK:SFTBF) (TYO:9984)’s $20.1 billion offer for the U.S. telecom company. Shares of Japan’s third largest telecommunications company were down 9.3 percent to 4,255 yen, and closed the day 6.8 percent lower at 4,290 yen.
Yesterday, DISH Network Corp (NASDAQ:DISH) made an unsolicited offer of $25.5 billion to acquire 70 percent stake in Sprint Nextel Corporation (NYSE:S). DISH plans to combine its own broadband and TV services with Sprint Nextel Corporation’s telecom operations.
A merger with Sprint Nextel Corporation (NYSE:S) was the biggest bet of Softbank Corp (PINK:SFTBF) (TYO:9984) to foray into the U.S. telecommunications industry, as handset shipments have declined 27 percent in Japan over the last five years.
DISH Network Corp (NASDAQ:DISH) has announced to offer $7 per share of the Overland, Kansas-based company, of which $4.76 per share will be in cash while the remaining amount will be paid in the form of DISH Network Corp shares that will represent 32 percent of the combined entity. DISH Network Corp (NASDAQ:DISH) has offered a 13 percent premium to Sprint Nextel Corporation (NYSE:S)’s closing price on April 12, but Sprint shares are trading above $7, indicating that investors expect a bidding war.
DISH Network Corp chairman Charles Ergen is aggressively trying to foray into the wireless phone industry, in order to make DISH the only company that offers the bundle of Internet, mobile phone and TV services in the United States. DISH Network Corp (NASDAQ:DISH) had already tried to spoil a deal between Sprint Nextel Corporation and Clearwire Corporation (NASDAQ:CLWR) in which Sprint Nextel Corporation (NYSE:S) already owns 50 percent stake.
Ergen had offered $3.30 per Clearwire Corporation (NASDAQ:CLWR) share to purchase its outstanding stock. His bid was higher than $2.97 per share Sprint Nextel Corporation (NYSE:S) is willing to pay for Clearwire.
If Sprint Nextel Corporation (NYSE:S) terminates the deal with Softbank Corp (PINK:SFTBF) (TYO:9984), it will have to pay SoftBank Corp $600 million in breakup fees. Additionally, the Japanese company would also receive about $1 billion in proceeds from $3.1 billion convertible bond it purchased from Sprint Nextel Corporation in October 2012. That’s because Sprint Nextel Corporation shares have gained over 33 percent since its proposed merger with Softbank Corp (PINK:SFTBF) (TYO:9984) was announced.
Analysts expect that Softbank Corp (PINK:SFTBF) (TYO:9984) would raise its bid as the company doesn’t want to miss the growth opportunities in the U.S.
