Sprint Nextel said Monday that it has agreed to sell a 70 percent stake to Japan's SoftBank for $20.1 billion, completing a deal that has been reported in the works for several days.
Of the purchase price, $12.1 billion will be used to purchase existing Sprint stock at $7.30 per share. The remaining $8 billion will go toward the purchase of new shares at $5.25 each. The companies said they expect the deal to close in mid-2013.
Sprint first revealed Thursday that it was negotiating with SoftBank, an announcement that caused shares to spike by as much as 19 percent. Shares closed at $5.73 on Friday.
Sprint Nextel is the third-largest wireless carrier in the United States, trailing AT&T and Verizon in market share. But the company has continued to lose money, despite finally adding Apple's iPhone to its network last year.
Sprint is based in Johnson County, KS. The company is Overland Park's largest employer with 7,500 employees in the area.
The deal is expected to bring a massive infusion of cash to help pay Sprint's debts and move ahead with its plans to convert to faster 4G service. The hope is SoftBank's wireless technology experience will improve Sprint's network speed, and thus making customers happier.
Analysts said this deal represents a big gamble by both companies.
Sprint's new organizational structure will include a 10-member board of directors, including at least three members of Sprint's current board of directors. CEO Dan Hesse will remain in his job and on the board. The company's headquarters will remain in Overland Park, Kan.
Sprint is up to its eyeballs in debt, undergoing an expensive -- and late -- transition to 4G-LTE, and losing contracted customers in the wake of its decision to ditch the Nextel brand. With smaller rival T-Mobile entering into an agreement to buy MetroPCS earlier this month, Sprint is feeling the heat of stronger competition from all sides.
Previously forced to go it alone, the company was working on a major upgrade intended to modernize its network. Still, Sprint's management faced criticism for lacking the chutzpah to do something bolder.
"We were worried about just surviving. All the metrics were moving in the wrong direction," Sprint CEO Dan Hesse said during the announcement in Tokyo. "Sprint for the first time in many years will have the strength and flexibility to play a key role in the evolution of the industry."
SoftBank is Japan's third-largest carrier, and is led by colorful and outspoken CEO Masayoshi Son.
"This is a historic day for Sprint as we continue on the progress we have made on our turnaround path," he said. "If we come to the States, I think we can provide much better competitive technology and services than United States cities have ever experienced."
The company isn't shy about dealmaking. It owns a stake in social media games company Zynga, had a chunk of Yahoo until last year, and orchestrated a blockbuster deal to buy Vodafone's Japan unit that gave the company a huge presence in the burgeoning wireless space.
SoftBank's flair and assertiveness could give Sprint a needed jolt. The company lost its brief marketing edge -- billing itself as the only nationwide network with unlimited data -- when T-Mobile recently reverted to its unlimited data plans as well.
"SoftBank brings so much more to Sprint than money," Hesse said. "This investment provides the opportunity to benefit from the knowledge and expertise from a leader in mobile Internet technology with a proven track record of challenging larger, incumbent carriers."
SoftBank is known as innovative marketing leader.
Regulators would likely cheer the deal, which would ensure that four strong, nationwide wireless competitors remain in the U.S. market. In AT&T's scuttled $36 billion buyout offer for T-Mobile last year, regulators said they opposed the deal because it would bring the number of national wireless choices down from four to three.
For employees who live and work in the Kansas City area, the deal could bring a more stable Sprint. This could lead to more jobs in the Kansas City area. For customers, they could see better and faster service.
Overland Park Mayor Carl Gerlach said Sprint means much to his city.
"They want to grow and enlarge and get more competitive in the U.S. market," Gerlach said. "That, to me, means they're going to add more jobs, they're going to grow the economy here in Overland Park. And that's good for Overland Park."
Investors reacted well to the news with Sprint's stock finishing only down four cents on Monday. Boards for both companies have approved the deal. Sprint's shareholders have to sign off. The hope is to complete the deal next year.
2012 KCTV (Meredith Corp.) and CNN.
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