Sprint Corporation (NYSE:S) which is trying to acquire T-Mobile Us Inc. (NYSE:TMUS), is said to have been in talks with eight banks to finance its proposed acquisition, Reuters reported. The terms of the financing arrangement are expected to be finalized by July, whereas the deal is expected to be announced by August 2014.
Sprint Corporation (NYSE:S) will be taking on more than $40 Billion in debt. As part of the financing by banks, a bridge loan of around $20 Billion will be made available by Softbank Corp. (Japan) (OTCMKTS:SFTBY), which is the parent company of Sprint and another $20 Billion will be provided as a refinance facility for the existing debt that T-Mobile holds.
In the past, AT&T Inc. (NYSE:T) had paid a reverse break-up fee of around $6 Billion, which included $3 Billion in cash and $3 Billion in spectrum, for opting out of its $39 billion attempt to acquire T-Mobile.
Similarly, the reverse break-up fee that Sprint would have to pay in case the deal is cancelled by Sprint, is reported to be around $2 Billion, whereas DEUTSCHE TELEKOM AG (OTCMKTS:DTEGF), which is the owner of T-Mobile, would have to pay a break-up fee of around $1 Billion.
As per negotiations between Softbank and Deutsche Telekom, Sprint Corporation (NYSE:S) has agreed to pay the price of around $40 per share for acquiring T-Mobile. The price of $40 per share values T-Mobile at nearly $32 Billion.
One of the major challenges that the companies would face in closing the deal is the expected regulatory hurdle i.e. the U.S. Federal Communications Commission, which is the telecom regulator, and the Department of Justice (DOJ) have expressed that they would like to have at least two competitors against market leader AT&T and Verizon.
The banks that are in discussion with Sprint Corporation (NYSE:S) to finance the acquisition include names like JPMorgan Chase & Co, Goldman Sachs Group, Deutsche Bank AG, Bank of America Merrill Lynch, Citigroup, Mizuho Financial Group, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Financial Group.
Meanwhile in the U.S. telecom sector, AT&T is in talks to acquire DIRECTV (NASDAQ:DTV) and Comcast Corporation (NASDAQ:CMCSA) is in talks for a merger with competitor Time Warner Cable Inc. (NYSE:TWC).
Paulson & Co, managed by John Paulson holds 64.11 million shares of Sprint Corporation (NYSE:S). Leon Cooperman’s Omega Advisors also holds 43.24 million shares of Sprint worth $397.33 million.
Disclosure: none
