Report: SoftBank and Sprint Boards Reach Agreement, Deal to Be Announced Monday (Updated)

According to a new report filed by CNBC, the respective boards for SoftBank and Sprint have reached an agreement in principle that will see SoftBank purchase a 70% stake of the company via an initial $8 billion tender offer for Sprint’s shares of the company, while extending another $12 billion offer for the remaining shares held by the wider market and investors, which will see SoftBank spend a total of $20 billion for the majority and controlling stake in the company.

The purchase is expected to be announced tomorrow morning, after Sprint and SoftBank complete the work of sorting out details. This follows days of fevered speculation and analysis following the shock Thursday reports confirming that both companies were in advanced discussions to consider a full purchase by SoftBank, which has since been confirmed to be a majority stake instead of initial reports which initially claimed that SoftBank was looking to purchase the company outright.

With the funds from the purchase, Sprint is expected to complete its long expected purchase of Clearwire by purchasing the remaining percentage of the company it does not currently control, while SoftBank is expected to use the majority stake purchase to establish itself in the US through Sprint while setting itself up for its transition to LTE by taking advantage of Sprint’s leverage with handset manufacturers for cheaper devices in Japan while it prepares for its own transition to LTE. While Sprint is working on a Clearwire purchase as a result of this deal, the actual transaction will not happen until the governance for Clearwire is in its control.

With the majority stake purchase, Sprint will solidify its third place position in the US marketplace while many are also expecting Sprint to go forward with its planned counteroffer for MetroPCS after the transaction, who is currently in the process of a reverse merger with T-Mobile after coming to terms within the last two weeks.

In terms of immediate changes, none are expected for current customers, with the majority of changes mostly being made on the executive side to reflect the new corporate parent. Sprint is also expected to use the cash from the purchase to address its long-standing debt covenants, covenants that hung over the company and frequently dragged down its stock price.

Much has been made of the SoftBank offer as Sprint’s lifeline as it currently performs its Network Vision initiative with the goal of expanding coverage for DirectConnect service over CDMA as well as expanding availability for LTE along with general coverage improvements.

While the SoftBank stake purchase may not mean immediate availability of its typical seasonal handset lineups found in Japan due to current network incompatibilities, if they’re even in play at all, the purchase will invariably be beneficial for both companies on the network and R&D front for LTE, with the eventual goal of making better use of Sprint’s advantageous spectrum position and growing further through additional acquisitions, such as the aforementioned MetroPCS counter offer.

Update: In an early morning press conference held in Tokyo, both Sprint CEO and SoftBank CEO were present to detail the specifics of the agreement.

• The stake purchase by SoftBank is expected to be completed by mid-2013
• The 70% stake will mean that Sprint will be reincorporated into “New Sprint” with new shares being sold after the purchase is completed. Sprint will become a US subsidiary of SoftBank as a result.
•  Sprint’s headquarters will remain in Overland Park, KS, with a new 10-member board of directors.
• Should the transaction not be completed because of changes on SoftBank’s end such as a lack of financing, the company will owe Sprint $600 million, however, if Sprint changes its mind and happens to field a better offer, it will owe SoftBank the same.
• Should Sprint’s shareholders not approve the stake purchase, it will owe SoftBank $75 million.