(Bloomberg) – SoftBank Group Corp., under pressure to raise capital after record losses in its investment business, is offloading part of its stake in wireless operator T-Mobile US Inc. in a $ 21 billion deal.
The transaction, along with a plan to sell a 5% stake in its Japanese wireless affiliate, is part of SoftBank’s broader $ 42 billion push to offload assets to finance share buybacks and pay off debts. Masayoshi Son, the founder of the company, is dealing with heavy losses in his Vision Fund after noting the value of investments in WeWork’s shared economy to Uber Technologies Inc.
SoftBank shares gained up to 3% in Tokyo. The Japanese investment giant will now turn its attention to other assets in its portfolio and may pursue a direct sale of part of its stake in Chinese e-commerce giant Alibaba Group Holding Ltd. Son said $ 11.5 billion raised from the issuance of Contracts to sell shares in Asia’s largest corporation was a first step in undoing more of its holdings.
SoftBank “needs to further improve its cash reserves,” the Japanese company said in a statement Tuesday, citing concerns over “a second and third wave of Covid-19 spread.” The company can invest the proceeds in high-quality securities until they are used for buybacks or debt reductions, he added.
Read more: SoftBank concludes share buyback for $ 4.7 billion in three months
The Japanese company is trying to shore up a balance sheet ravaged by write-downs that triggered a record loss of 1.9 trillion yen ($ 18 billion) last fiscal year at the Vision Fund. As investment concerns mounted, Son responded with rapidly repurchasing shares, completing a $ 4.7 billion buyback program in just three months.
As part of a complex series of transactions revealed Tuesday, T-Mobile will carry out a public offering of 133.5 million common shares, the operator said in a statement. It will also grant subscribers 10 million shares. Additionally, T-Mobile intends to sell up to 30 million common shares to a Delaware legal trust.
Five million shares will be sold to an entity controlled by Marcelo Claure, a SoftBank executive and T-Mobile board member, with funds from SoftBank. And T-Mobile will be entitled to buy almost 20 million shares. In total, up to 198.3 million shares owned by SoftBank will be transferred.
SoftBank secured the stake in T-Mobile US this year alone, after US regulators approved the acquisition by the US wireless operator of $ 26.5 billion from Sprint Corp. T-Mobile’s market value is approximately $ 132 billion
Read more: SoftBank’s Vision Fund loses $ 17.7 billion on WeWork, Uber (2)
T-Mobile shares closed at $ 106.60 in New York on Monday, bringing the value of the 198 million shares to around $ 21 billion. They were up 36% this year through Monday close.
Both companies have said before that they are discussing a possible deal. Even before the transaction, Deutsche Telekom AG was the controlling shareholder of T-Mobile due to how voting rights were structured after the agreement with Sprint.
The share offering, to be traded on June 24, will be overseen by Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., JPMorgan Chase & Co., Barclays Plc, Bank of America Corp., Deutsche Bank AG and Mizuho Financial. Group Inc PJT Partners served as a financial advisor to the T-Mobile board. SoftBank said it will pay T-Mobile $ 300 million as part of the transaction and will cover all fees and expenses related to the deal.
(Updates with SoftBank actions in the third paragraph)
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