SoftBank Said to Plan a Direct Offer for Charter

(Bloomberg) —
(Reuters/Issei Kato)

Masayoshi Son, the chairman of Japanese technology goliath SoftBank Group, wants in on the U.S. cable market. And he appears determined to use Charter Communications to get him there, one way or another.

Son’s initial gambit failed: Charter on Sunday rebuffed his proposal to combine the company with Sprint, which SoftBank controls. Undeterred, the Japanese billionaire is mustering an offer from SoftBank to buy Charter outright and intends to make the offer this week, according to a person with knowledge of his plans who asked not to be identified ahead of a public announcement.

Bidding for Charter, which has a market value of $101 billion, would mark the most ambitious target yet for Son, whose deal spree has made SoftBank one of the most debt-laden companies in Japan. While an early bet on Alibaba Group Holding has delivered outsized returns, Sprint has lost billions since he bought control in 2013 while the Japanese company’s investments in India have been largely written off.

“Son is going back to his bad old days of wanting to conquer the world, just as we thought he was becoming more sensible,” said Amir Anvarzadeh, head of Japanese equity sales at BGC Partners Inc. in Singapore. “It does sound as if they’re doing anything but de-leveraging. They’re re-leveraging.”

The plan for Charter isn’t complete and could change, the person familiar with the matter said.

Shares of SoftBank fell 2.3 percent in Tokyo, giving the company a market value of $89 billion. The company also has debt of $135 billion (14.9 trillion yen), making it the second-most indebted non-financial company in Japan, trailing only Toyota Motor.

The plan by Son could reignite deal talks that had appeared to be dead late Sunday, when Charter said it wasn’t interested in buying Sprint. The billionaire had previously proposed a deal that would create a new public company to absorb Sprint and Charter and combine them, people familiar with the matter said last week.

“We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint,” Charter said in a statement before Bloomberg reported Son’s latest plans.

Son is known for bold decisions and has spoken, without irony, about his 300-year plan for SoftBank and aims to build the world’s most valuable company. His Vision Fund has raised $93 billion for tech investments, winning backing from Saudi Arabia, Abu Dhabi, as well as Apple and Qualcomm.

Last year, SoftBank paid $32 billion for chipmaker ARM Holdings in a bet on the nascent concept known as the Internet of Things, while he has committed billions to ride-sharing services such as Didi Chuxing in China and Southeast Asia’s Grab.

U.S. cable and wireless carriers have been circling each other as more consumers watch video and access the internet on mobile devices. By combining, companies like Charter and Sprint could offer a full suite of telecommunications services to customers, from home broadband internet to wireless plans, and compete head-to-head with the packages sold by phone giants AT&T and Verizon Communications.

Since the end of May, Charter and Comcast had been in exclusive talks with Sprint over possible deals, including one that would allow the cable companies to resell wireless service under their own brands.

The exclusivity ended this week, and Charter has decided against a reselling deal with Sprint, according to another person familiar with the matter, who asked not to be identified discussing private information.

“Overall, our view is that Charter likely does not want to sell, but that SoftBank is one of the few companies that could put a bid in big enough to take control,” analysts at JPMorgan Chase & Co., led by Philip Cusick, said in a note. “While we don’t see a deal as very likely, especially given later headlines that Charter is cool to the idea, Masa is never to be counted out as a buyer.”

A combination of Sprint and Charter would put together the fourth-largest U.S. wireless carrier with the No. 2 U.S. cable company. Sprint, based in Overland Park, Kansas, has a market value of almost $33 billion and even more in long-term debt — putting pressure on Son to make a deal as Sprint’s losses mount and bond maturities approach.

JPMorgan estimates synergies from combining Sprint with Charter at about $2 billion a year.

Son has also been considering merging Sprint with T-Mobile US Inc., the third-biggest U.S. wireless carrier. Sprint has argued publicly that a merger with T-Mobile makes sense because it would create a bigger wireless carrier to take on larger competitors AT&T and Verizon. But a surge in the value of Sprint’s wireless spectrum holdings persuaded executives to consider other deals, too, Bloomberg reported in April.

Charter has a separate pact with Comcast that could complicate a deal with Sprint. The cable companies agreed in May to work together on any transaction with a wireless company in the next year. That means if Charter changes its mind and decides to merge with Sprint, Comcast would have a say in the matter.

Charter has long-term debt of more than $63 billion. Its revenue totaled $40.8 billion in the past year.

Cable billionaire John Malone holds a 21 percent stake in Charter through his Liberty Broadband Corp. Son has also met with Malone and Warren Buffett about making potential investments in Sprint, a person familiar with the matter said earlier this month.

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