Sprint, T-Mobile Near Agreement on New Merger Terms -- 3rd Update
21 February 2020 - 11:36AM
Dow Jones News
By Cara Lombardo, Dana Cimilluca and Drew FitzGerald
Sprint Corp. and T-Mobile US Inc. have agreed on new terms for
their merger, as the wireless carriers race to close the deal after
overcoming a federal court challenge.
The parties will improve the exchange ratio in the all-stock
deal for T-Mobile's parent, Deutsche Telekom AG, the companies said
in a written statement confirming an earlier Wall Street Journal
report.
U.S. District Judge Victor Marrero last week allowed the deal to
proceed by rejecting arguments from a group of state attorneys
general seeking to block the merger as anticompetitive.
T-Mobile said after the court ruling that it was working to
close the transaction as soon as April 1.
Originally, 9.75 Sprint shares were to be exchanged for each
T-Mobile share. Under the revised deal, SoftBank Group Corp., which
owns more than 80% of Sprint's common stock, will exchange the
equivalent of 11 of its shares for each T-Mobile share. Sprint's
other shareholders will continue to get the original exchange
ratio.
Deutsche Telekom is to own about 43% of the combined company
now, up from just below 42% when the deal was first announced
nearly two years ago, the companies said. SoftBank's percentage
will drop to approximately 24% from 27%. The remaining 33% is to be
held by the public, up from 31%.
To effect the changes, SoftBank has agreed to surrender 48.8
million T-Mobile shares to the new company, to be called T-Mobile.
Those shares could be reissued to SoftBank if T-Mobile's stock
price reaches certain milestones beginning two years after the deal
closes.
The original merger agreement allowed either party to walk away
after Nov. 1, 2019, without paying a penalty. Both companies stuck
with the deal over the following months, however, as they defended
it in federal court. They argued the merger would create a more
efficient network that would offset any harm to competition.
Given the downward slide of Sprint's shares amid continued
customer defections since the tie-up was announced -- as T-Mobile's
growing customer base pushed up its stock -- Deutsche Telekom was
expected to push for an altered exchange ratio and a larger share
of the new T-Mobile.
When the deal was announced, Sprint shares were trading around
$6.50. Before the court ruling Feb. 11, Sprint's share price had
sunk to $4.80. It has since jumped above $9. Sprint shares closed
nearly unchanged Thursday at $9.48, and rose 5% in after-hours
trading. T-Mobile shares closed down about 1% at $99.50, and fell a
further 1% in after-hours trading.
The deal was valued at $26 billion when the carriers originally
struck it in April 2018.
Both the U.S. Justice Department and Federal Communications
Commission approved the combination last year after they secured
concessions from T-Mobile and Sprint, the third- and fourth-largest
U.S. wireless carriers by subscribers, respectively. Those
concessions include an agreement that Sprint would sell airwaves
and about nine million customer accounts to Dish Network Corp. to
set up a fourth nationwide cellphone carrier.
The new agreement allows either company to walk away from the
merger without penalty if the transaction hasn't closed by July
1.
T-Mobile executives have said the transition will be smooth,
touting their experience handling a past combination with wireless
provider MetroPCS.
The new T-Mobile will have more than 90 million U.S. customers
and aims to nab more subscribers from AT&T Inc. and Verizon
Communications Inc. The three companies will dominate the U.S.
wireless market, though they must also compete with more newcomers,
including cable companies that resell service from large
carriers.
T-Mobile and Sprint have spent more than seven years pursuing a
combination in some form. The two companies abandoned previous
attempts in 2013 and 2017 before their boards struck an agreement
in early 2018 that would allow T-Mobile to take over its smaller
rival, creating a company closer in size to Verizon and
AT&T.
--Sarah Krouse contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com, Dana Cimilluca
at dana.cimilluca@wsj.com and Drew FitzGerald at
andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
February 20, 2020 19:21 ET (00:21 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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