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Japan's Softbank May Acquire Sprint

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Replying to:  Sprint = $12.8 Billion T-Mobile = $39 Billion What's up with that? by mikkej2k   Oct 11, 2012, 7:41 AM

Re: Sprint = $12.8 Billion T-Mobile = $39 Billion What's up with that?

by vikes0115    Oct 11, 2012, 10:42 AM

There are a couple of key differences which prevent you from directly comparing those two figures.

First, the way the press release and corresponding news article are worded it appears that the $12.8 billion figure is what Softbank is expecting to pay to purchase the stock associated with this transaction. As such that figure would not include any of Sprint's debt. The T-Mobile debt that would have been assumed by AT&T is included in that $39 Billion price tag.

The debt would typically not be included in the transactional value, as Sprint likely will not end up as a solely owned subsidiary of Softbank.

This brings up the second key point, the $12.8 Billion figure does not necessary reflect a purchase of all of Sprint. There are rumors that this may reflect as little as 2/3 of the outstanding shares of Sprint. With its current market cap of $15 billion, the offer (if it were for 2/3) would seem reasonable.

Once you factor in the outstanding debt that Sprint carries and adjust the price for the percentage of Sprint that will be purchased, the comparable valuation would be in excess of the $39 Billion purchase price for T-Mobile.

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