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[NEW YORK] SoftBank Group Corp, the majority owner of Sprint Corp, is willing to accept a stock-for-stock merger with T-Mobile US that values Sprint at or near its current market price, according to people familiar with the matter.
While the two sides haven't agreed on an exact value, SoftBank doesn't expect to receive much of a premium to Sprint's current share price and may accept a deal that values the fourth-ranked US wireless carrier at about its US$34 billion market capitalization, said the people, who asked not to be identified because the discussions are private.
Deutsche Telekom AG, the majority owner of third-largest US wireless provider T-Mobile, previously told SoftBank it felt Sprint shares should be valued at a significant discount to their market value, two of the people said. In recent months, Deutsche Telekom has told SoftBank it's willing to come up on value for Sprint, they said.
At current market values, a stock-for-stock merger would give SoftBank almost 33 per cent of the combined company and Deutsche Telekom about 39 per cent. Deutsche Telekom plans to consolidate the merged company's earnings by controlling the board of directors, said one of the people. Other governance arrangements haven't been finalized, the person said.
Deutsche Telekom is pressing for a deal that would value Sprint below its current market capitalization, which could leave SoftBank owning 30 per cent or less of the combined company, one of the people said. Another of the people said the terms haven't been resolved and that SoftBank is unlikely to accept a deal for less than Sprint's market value. How the two sides will determine market value remains undecided, one of the people said.
It also hasn't been decided whether Sprint shares or T-Mobile will issue shares to complete the deal, the people said.
Representatives for SoftBank, Sprint and T-Mobile declined to comment.