This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why Sprint's Softbank Deal Is Good for Yahoo!

NEW YORK ( TheStreet) -- SoftBank (SFTBY:OTC) just dropped $20 billion to buy control of Sprint Nextel (S).

One of the implications of this deal, some observers have concluded, is that SoftBank will now no longer be able to do a deal to buy back Yahoo!'s (YHOO - Get Report) stake in Yahoo! Japan, which SoftBank also controls.

Not so fast. There are several ways the Sprint deal could be good for Yahoo! shareholders.

SoftBank is not using any of its cash to buy Sprint. SoftBank is financing the deal through a large loan of the same amount from several large Japanese banks.

SoftBank's stock is currently worth $32 billion. It's up nearly 600% in the last 10 years. Part of that is growth, but part of that is appreciation in the yen. The yen is worth 33% more today than it was a decade ago, relative to the dollar.

Japan has an inflated currency, and Softbank is embracing that -- even after SoftBank's stock has dropped 20% since Thursday on news of this deal.

My point: This Sprint deal isn't draining their cash or their already strong stock price.

SoftBank and its subsidiary, Yahoo! Japan, still have lots of cash to do a deal with Yahoo!. Softbank has about $10 billion in cash at the moment. Yahoo! Japan has another $3 billion.

But why should SoftBank or Yahoo! Japan use any of their cash when the Japanese banks are hungrily looking for new loans to give out to good corporate clients? Just as they did for Sprint, the Japanese banks might be happy to provide the cash to finance the buyout of Yahoo!'s stake.

How much cash would they need? Yahoo! Japan is currently worth $20 billion. Yahoo! has a 35% stake of that worth, ostensibly $7.2 billion.

Yahoo! and SoftBank haven't been able to come to agreement around price. SoftBank has argued to Yahoo! that there is no buyer for the 35% stake.

Therefore, Yahoo! must agree to a discount. Yahoo! has argued that this is not a block sale. It's actually SoftBank reducing Yahoo! Japan's share count by 35%.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
S $4.55 -0.87%
YHOO $32.37 1.57%
AAPL $109.50 -1.16%
FB $92.47 0.08%
GOOG $639.16 -0.50%


Chart of I:DJI
DOW 17,050.75 +138.46 0.82%
S&P 500 1,995.83 +15.91 0.80%
NASDAQ 4,810.7880 +19.6360 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs