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SoftBank Ending T-Mobile Deal Opens Door to Dish, Line: Real M&A
2014-08-21 23:36:54.790 GMT


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By Aaron Clark, Grace Huang and Angus Whitley
Aug. 22 (Bloomberg) -- Billionaire Masayoshi Son, Japan’s
most acquisitive executive, is raising a war chest that could be
used to buy companies from Yahoo! Inc. to Dish Network Corp.
Son’s SoftBank Corp. is selling almost $4 billion in bonds
to help finance future investment even after the company
scrapped a merger of its Sprint Corp. with T-Mobile US Inc.
Targets could include an Internet, music or entertainment
company that would help bolster Son’s global technology empire
and possibly increase Sprint’s appeal to consumers by widening
their choice of content to download.
Yahoo would fit that category, said Atlantis Investment
Research Corp. Taking a stake in messaging service Line Corp. is
another option for the Tokyo-based mobile-phone operator,
according to Thornburg Investment Management Inc. Already the
biggest shareholder in Alibaba Group Holding Ltd., SoftBank
could team up with the e-commerce company, or buy a movie maker
or news service, said SMBC Nikko Securities Inc. Abelian
Research said the $85 billion company may even consider tucking
Dish into its fold to better compete with the likes of AT&T Inc.
“Japan is not big enough for Son,” said Edwin Merner,
president of Atlantis Investment Research in Tokyo. “He’s
looking at the world.”
Son, 57, said Aug. 20 he is thinking about his next move
after dropping a pursuit of T-Mobile, a $24 billion company. A
spokeswoman for SoftBank declined to comment on any specific
takeover targets. Representatives for Sunnyvale, California-
based Yahoo and Englewood, Colorado-based Dish declined to
comment. A representative for Alibaba in the U.S. declined to
comment. A Tokyo-based spokeswoman for Line didn’t immediately
return a call seeking comment.

Dealmaking History

SoftBank, where Son is chairman and chief executive
officer, has struck $51 billion of acquisitions in the past five
years, according to data compiled by Bloomberg. That’s almost
double the amount spent by Japan’s next-biggest buyer, Nippon
Steel & Sumitomo Metal Corp.
With the T-Mobile deal off the table, SoftBank said this
week it’s selling 400 billion yen ($3.9 billion) of bonds to
repay debt and finance future investment. The proceeds haven’t
been earmarked for a specific deal, the company said. SoftBank
had about $19 billion in cash and equivalents at the end of
June, Bloomberg data show.
The breadth of Web portal Yahoo’s services, which span
blogging, mobile Internet, e-mail, technology and beauty, helps
rank the $37 billion company among SoftBank’s potential targets,
said Merner. SoftBank is also the largest shareholder in Yahoo
Japan Corp.

Deal Options

Softbank could structure an asset swap with Yahoo to gain
the U.S. company’s stakes in Yahoo Japan and Alibaba without
paying a big tax bill, said Di Zhou, an analyst at Santa Fe, New
Mexico-based Thornburg Investment, which oversees about $89
billion including SoftBank shares. An all-stock purchase of
Yahoo and a spinoff of the less desirable assets, such as the
U.S. operations, is another possibility, she said.
Zhou said SoftBank could also consider taking a stake in
Line, Naver Corp.’s mobile-messaging service, which people
familiar with the matter said filed confidentially for a U.S.
public offering. SoftBank could link the Japanese messaging
company’s platform with Sprint phones, as well as Yahoo Japan e-
commerce, and mobile games from GungHo Online Entertainment Inc.
and Supercell Oy, the developers in which it owns stakes, Zhou
said.

Changing Company

“SoftBank is always saying that they’re not just a
wireless operator, they’re a mobile Internet company,” she said
by phone. “That’s why you’ve seen them consistently investing
or incubating a lot of Internet companies within the SoftBank
venture. They’re trying to build out this mobile Internet and
content ecosystem to keep their subscribers more sticky.”
Son, now Japan’s second-richest man, founded SoftBank in
1981. He turned the software wholesaler into a national mobile-
phone operator and amassed investments in more than 1,300
businesses, including a stake in Chinese Web portal Alibaba that
may be worth $64 billion. Alibaba is planning an initial public
offering for next month, people familiar with the matter said
last week.
“An alliance with Alibaba is possible,” Satoru Kikuchi,
an analyst at SMBC Nikko Securities in Tokyo, said by phone.
“There are a lot of choices for SoftBank, such as entertainment
and media agencies.”

Music Interest

Owning a music service helps mobile-phone operators squeeze
more money from customers, said Eva Hunyadi, research analyst at
Juniper Research Ltd., based in Basingstoke, England.
“Even if it increases the phone subscription by a few
dollars per month, that would probably be a cost that consumers
would be willing to pay,” Hunyadi said by phone.
It’s an industry SoftBank has recently considered. Last
year, the company offered $8.5 billion for Vivendi SA’s
Universal Music Group, though the approach ended in a rebuff,
according to people with knowledge of the proposal. A deal would
have handed Son the world’s biggest record company, home to
artists including Lady Gaga and Taylor Swift.
Dish, the second-largest U.S. satellite-TV provider, may
offer Son a way to satisfy his desire for a greater share of the
U.S. telecommunications market, said Charles Golvin, founder of
wireless research firm Abelian Research. In addition to tapping
Dish’s stockpile of wireless spectrum, SoftBank could use an
acquisition of the pay-TV provider to develop a home broadband
platform that would compete with products from Verizon
Communications Inc. and AT&T, he said.

Big Thinker

“In stark contrast to the T-Mobile deal, it has many of
the results and potential customer benefits that the regulators
are looking for in new telecom tie-ups,” Golvin said.
For now, Sprint CEO Marcelo Claure is plowing ahead with
cheaper services, without the help of T-Mobile or any other
proposed acquisition. Son, who is also chairman of Sprint,
brought Claure on board this month. In the meantime, Son is
unlikely to stop pursuing deals, said Merner at Atlantis
Investment Research.
“He thinks big,” he said. “He is going to try for
another one.”

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--With assistance from Rin Ichino in Tokyo and Brooke Sutherland
in New York.

To contact the reporters on this story:
Aaron Clark in Tokyo at +81-3-3201-3882 or
aclark27@bloomberg.net;
Grace Huang in Tokyo at +81-3-3201-2006 or
xhuang66@bloomberg.net;
Angus Whitley in Sydney at +61-2-9777-8643 or
awhitley1@bloomberg.net
To contact the editors responsible for this story:
Michael Tighe at +852-2977-2109 or
mtighe4@bloomberg.net;
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Whitney Kisling