Sprint's takeover by SoftBank OK'd by Justice Department

SoftBank's planned $20.1 billion purchase of a 70 percent stake in Sprint Nextel (NYSE:S) was cleared by the U.S. Department of Justice, giving a boost to SoftBank as it initiates a $4.2 billion bond offering.

In a letter to the FCC, the DOJ said it--along with the Federal Bureau of Investigation with the concurrence of the Department of Homeland Security--had analyzed measures undertaken by SoftBank and Sprint "to address potential national security, law enforcement, and public safety issues, including supply chain issues." Based on that review the DOJ said the agencies have no objection to the deal's consummation.

Charlie Ergen's Dish Network (NASDAQ:DISH), which made a $25.5 billion counteroffer for Sprint, has repeatedly raised the national security issue in an effort to derail SoftBank's proposal. On its nationalsecuritymatters.com website, Dish alleged a "foreign controlled Sprint" would present a danger to U.S. interests, particularly since SoftBank currently "spends significant amounts with Chinese equipment manufacturers for its wireless network in Japan."

To counter such concerns, Sprint last week announced that retired Adm. Mike Mullen, the former chairman of the Joint Chiefs of Staff, will join the company's board of directors as an independent director upon the closing of Sprint's transaction with SoftBank and will serve as the company's "security director" to ensure Sprint is complying with conditions set out in the national security agreement with U.S. government agencies.

The FCC is the final agency reviewing SoftBank's bid for Sprint and does not have a deadline for deciding whether to approve or deny the transaction. Bloomberg recently reported that Sprint might delay the scheduled June 12 shareholder vote on SoftBank's offer to give Dish more time to firm up its offer. But as of June 7, the shareholder vote was still on schedule.

Though Dish's offer is technically higher than SoftBank's, it also would incur considerable debt for the company. SoftBank, meanwhile, has repeatedly shown that it can readily achieve lower funding costs than Dish.

SoftBank's latest plan to raise $4.2 billion by issuing five-year notes with a mere 1.74 percent yield is the Japanese company's second bond sale to individual investors in three months and represents Japan's biggest retail offering by a non-financial company, according to Bloomberg. In contrast, Dish had to pay a 4.25 percent yield on similar-maturity debt it sold in April.

Yet, if the deal with Sprint fizzles, SoftBank may be left with money burning a hole in its pocket. That could lead it to T-Mobile US (NYSE:TMUS), where it might buy out Deutsche Telekom's 74 percent stake. Reuters reported last week that SoftBank has been discussing such an arrangement with Deutsche Telekom as a backup plan in case the Sprint deal collapses.

A New York Times article, however, suggested word of SoftBank's interest in T-Mobile may be an attempt to sway recalcitrant Sprint shareholders.

For more:
- see this DOJ letter
- see this Bloomberg article and this article
- see this New York Times article

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