Softbank and Sprint have reached a deal under which Softbank will pay $20 billion for a 70 percent stake in the wireless telecom operator, according to people close to the situation.
The deal is expected to be announced Monday morning and while certain details are still being worked out, the boards of both companies have signed off on a transaction under which Softbank will buy $8 billion worth of shares directly from Sprint (S) and tender for another $12 billion worth of the shares from existing holders.
The price of the tender offer is $7.30 a share, a large premium to Sprint's current price. Given the deal's structure, it will not require a shareholder vote.
The equity being purchased directly by Softbank includes a $3 billion convertible bond purchase that is exercisable at $5.25 and will be sold well before the deal closes, in order to provide funds for Sprint as it moves towards purchasing the roughly 52 percent of Clearwire it does not already own.
While a Sprint purchase of Clearwire will not be announced Monday, Sprint is working on that deal and needs to insure the governance for Clearwire is in its control prior to closing the Softbank transaction.
The remaining $5 billion in primary equity being purchased by Softbank is likely to be purchased at $7.30 a share, although details are still being negotiated, said people familiar with the talks.
The purchase is a huge one for Softbank, which is essentially making a $20 billion gamble that it success in developing LTE wireless services in its home market of Japan can be translated to the U.S. Sprint, while the third largest wireless provider in the U.S., significantly trails the two market leaders, Verizon (VZ)and AT&T (T).
Softbank's hope, say people familiar with its strategy, is to build on Sprint's spectrum position, while hoping the company can further consolidate the wireless industry through acquisitions of more spectrum and other operators. The deal is expected to close in roughly six months.