Japan's Softbank to buy 70 percent of Sprint for $20.1 billion

Mon, Oct 15 07:01 AM EDT 1 of 7 By Mari Saito and Tim Kelly TOKYO (Reuters) - Japanese mobile operator Softbank Corp said it will buy about 70 percent of Sprint Nextel Corp, the third-largest U.S. carrier, for $20.1 billion - the most a Japanese firm has spent on an overseas acquisition. The deal, announced by Softbank's billionaire founder and chief Masayoshi Son and Sprint CEO Dan Hesse at a packed news conference in Tokyo on Monday, gives Softbank an entry into a U.S. market that still shows growth, while Japan's market is stagnating. It also gives Sprint the firepower to buy peers and build out its 4G network to compete better in a market dominated by AT&T and Verizon Wireless. Analysts have long said the U.S. telecoms industry needs consolidation, but few looked to Japan as a catalyst. Some investors worry Softbank is biting off more than it can chew. But the 55-year-old Son, a rare risk-taker in Japan's often cautious business circles, is betting U.S. growth can offer relief from cut-throat competition in Japan's saturated mobile market. Combined, Softbank and Sprint will have 96 million users. "It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built," he told the news conference. "But not taking this challenge will be a bigger risk." FIRE-POWER Softbank said that as part of the deal it would buy $3.1 billion of bonds convertible into Sprint stock at $5.25 a share, while about 55 percent of existing Sprint shares would be exchanged for $7.30 per share in cash, with the transactions to be completed by mid-2013. Sprint shares closed Friday at $5.73. Hesse, who will stay on as Sprint CEO, said the Softbank investment would give Sprint opportunities it hadn't had since he joined the firm in late-2007, and enable the U.S. firm to play a bigger role in future market consolidation. "This is pro-competitive and pro-consumer in the U.S. because it creates a stronger No. 3 ... it competes with the duopoly of AT&T and Verizon. When you look at what Softbank has accomplished in Japan with the No. 3 carrier, it's something we can learn from," he said. Softbank shares tumbled more than 8 percent earlier on Monday, closing down 5.3 percent at their lowest finish in 5 months. The stock has lost more than a fifth of its value - or $8.7 billion - since news first broke late last week of the firm's interest in Sprint. On Monday, credit rating agency Moody's said it was reviewing Softbank's ratings for a possible downgrade, but some analysts said Son's gamble might pay off in the end. "It's the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive," Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement. Softbank bought Vodafone's Japan unit for $15.5 billion in 2006. "Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realize he's making the right decision down the road," said Nakanishi. Four banks - Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Deutsche Bank - have approved loans totaling 1.65 trillion yen ($21.1 billion) to Softbank, three sources with direct knowledge of the matter told Reuters. Sprint, which has lost money in all of the last 19 quarters, has net debt of about $15 billion, while Softbank has net debt of about $10 billion. Brokers have warned that the deal could leave Softbank with "unacceptably high" gearing, a ratio of its debt to shareholder capital. Standard & Poor's has warned the deal "may undermine Softbank's financial risk profile" and would pressure its free operating cash flow for the next few years. Reflecting those concerns, Softbank's 5-year credit default swap spreads - the cost of protecting its debt against default - widened to 267/327 basis points from around 160 basis points before the deal, and yields on its yen bonds have risen sharply. NO CLEARWIRE OBLIGATION Analysts have said that Softbank buying 70 percent of Sprint for $20 billion would imply the No. 3 U.S. wireless company was worth about $28.6 billion, some two-thirds greater than its market capitalization at Friday's close. Sprint, which is going through a $7 billion upgrade of one of its networks, while closing its Nextel iDen network, could use some of the proceeds to buy the part of Clearwire Corp it doesn't already own, analysts have said. Clearwire has high-speed infrastructure that is attractive to mobile carriers struggling with the increase in data due to the rising numbers of smartphone users. Shares in Clearwire, 48 percent-owned by Sprint, soared on Friday. Softbank said, however, that the deal did not require Sprint to take any action involving Clearwire. An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which is yet to offer the Apple smartphone. With Sprint in hand, Softbank may also look to acquire smaller U.S. carrier MetroPCS Communications, Japanese media have reported. Sprint has had a long interest in MetroPCS, which earlier this month agreed to merge with T-Mobile USA, part of Deutsche Telekom AG. The Sprint deal takes outbound deals by Japanese firms to a record $75 billion this year, Thomson Reuters data shows, underscoring a strong appetite for overseas assets seemingly unaffected by signs of slowing global growth. This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s. Raine Group LLC, a boutique merchant bank focused on the technology, media and telecoms sector, and Mizuho Securities were lead financial advisers to Softbank. ($1 = 78.3550 Japanese yen) (Additional reporting by Nadia Damouni in New York and Taro Fuse, Sophie Knight, James Topham, Andrea Shalal-Esa in Tokyo; Writing by Linda Sieg; Editing by Ian Geoghegan) ================

Yahoo to lay off 2,000 employees

Wed, Apr 04 18:28 PM EDT
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By Alexei Oreskovic and Sarah McBride

(Reuters) - Yahoo Inc will lay off 2,000 people, or 14 percent of its workforce, in its deepest round of job cuts in years as new Chief Executive Scott Thompson tries to jumpstart growth with a leaner, more agile company while saving hundreds of millions of dollars.

Wall Street's reaction was lukewarm, after two previous Yahoo CEOs failed to find an answer to rivals like Web-search leader Google and the Facebook social-networking site.

Sunnyvale, California-based Yahoo, which ended 2011 with some 14,000 employees, said it would save $375 million annually from the cuts and incur a pre-tax cash charge in the second quarter of $125 million to $145 million.

The company declined to comment on severance details.

Some analysts were skeptical about the widely expected layoffs, which weren't accompanied by details of Yahoo's broader plan to revamp its business.

"You can't cut your way to revenue growth," said Colin Gillis of BGC Partners. "What people want to see out of Yahoo is ... a plan and provision for revenue growth."

Third Point, an activist hedge fund that is waging a proxy fight to install a slate of handpicked directors on Yahoo's board, described the layoffs as "necessary."

But the hedge fund, Yahoo's largest shareholder with a 5.8 percent stake, said in a statement that it was "disappointed that this round of cuts occurred before CEO Scott Thompson has articulated his strategic plan for the company."

Thompson, in all-staff memo obtained by Reuters, said the changes would transform Yahoo into a leaner outfit that focuses on its main businesses, which he identified as "core media and communications," "platforms" and "data."

"The changes we're announcing today will put our customers first, allow us to move fast, and to get stuff done," Thompson said in the memo, adding that the changes would result in a "smaller, nimbler, more profitable" company.

"We are intensifying our efforts on our core businesses and redeploying resources to our most urgent priorities," Thompson wrote in the memo.

Macquarie Research's Ben Schachter saw the layoffs as a start in determining the new direction of the company.

"Scott Thompson is not there to tweak the business," Schachter said. "He saw something in the assets to make him think there was potential."

A Yahoo spokeswoman said that every organization within the company was affected by the layoffs but that some groups were affected more than others. She declined to specify the groups most affected.

Yahoo said it would provide more details of its plans when it releases first-quarter results on April 17.

The layoffs come as Yahoo's revenue declines due to competition from Google and Facebook. Last year, Yahoo's revenue totaled $4.98 billion, compared with Facebook's $3.71 billion, accomplished with just 3,200 employees.

Yahoo is also fighting a battle with hedge fund manager Daniel Loeb.

Loeb, who runs Third Point, is seeking to appoint four new directors to Yahoo's board. Third Point, with a 5.8 percent stake in Yahoo, is the company's largest shareholder.

Yahoo's shares ended down 0.6 percent $15.27 on the Nasdaq. The Nasdaq market dropped nearly 1.5 percent.

(Editing by John Wallace, Maureen Bavdek, Tim Dobbyn and Steve Orlofsky)

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UPDATE 1-Yahoo Japan, Yahoo Inc end talks on share buyback
Tue, Apr 24 04:11 AM EDT

TOKYO, April 24 (Reuters) - Yahoo Japan Corp's talks with key shareholder Yahoo Inc for a share buyback have ended with no agreement, but the companies left open the possibility of further negotiations, Yahoo Japan's chief financial officer Toshiki Ohya said on Tuesday.

"We want to positively consider resuming negotiations if the conditions are right," Ohya told reporters.

Yahoo Inc's chief executive, Scott Thompson, said last week the plan to sell its stake in Yahoo Japan has been plagued by a "valuation gap" that the parties have failed to bridge.

Yahoo Inc, under pressure to free up cash for shareholders and simplify its ownership structure, has been looking for more than a year to monetise its stake in Yahoo Japan, which was formed as a joint venture between the U.S. Internet pioneer and Japan's Softbank Corp in 1996.

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