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The Deal: Softbank CEO Slams Dish's Sprint Offer

NEW YORK ( TheDeal) -- Softbank Corp. chairman and CEO Masayoshi Son questioned the math underlying Dish Network Corp.'s rival bid for Sprint Nextel Corp. during an investor presentation earlier this week.

Son suggested there was no need for the Japanese carrier to improve its offer, which he maintained is better than one submitted by Charlie Ergen's Dish Network in mid-April. "Why would we [raise the bid]?" Son asked.

Shares of Sprint gained 4 cents, or roughly 0.6% to $7.09 on Wednesday.

Both Softbank and Dish included a mix of cash and stock in their offers for Sprint. The companies have differing ideas about how to value the equity in the post-merger company. When Softbank announced a $20.1 billion investment in Sprint in exchange for a 70% stake in October, it did not ascribe a per share value to the deal.

Ergen has said that Dish's $25.5 billion offer comes to $7 per share, including $4.76 in cash and $2.24 in equity of the combined companies. The stock has traded above Dish's offer price. The satellite TV mogul said that Softbank's offer amounted to $6.22 per share, or $4.03 in cash and $2.16 in stock.

Son took issue with the proposal on Tuesday. "Is it right? Is it true? Is it misleading?" he asked. "I would say the number is wrong, totally wrong."

Son said that Dish's $7 per share valuation should be adjusted for dilution, added debt, Softbank's $600 million breakup fee, $400 million in other transaction expenses and Sprint's higher cost of capital for the year or so that it would take Ergen to close the deal. After those costs, Son suggested, Dish's offer would be $6.05 per share.

Son said that Softbank's offer, before synergies, comes to $6.38 per share, including $4.03 in cash and $2.35 in equity, for a 5% premium to Dish. And unlike Dish, Softbank has a large business. It is in Japan, of course, so the company could not enjoy many of the benefits of combining operations.

However, Son said on Tuesday that a combined Sprint and Softbank would be the top customer for Ericsson AB, Alcatel-Lucent SA and Samsung Corp. It would be one of the top buyers of Apple Inc.'s iPhone. The benefits of this scale in handsets and networking gear, plus Softbank's wireless expertise, would generate $2 billion in savings and improvements, Son said. The benefits would push the value of its offer to $7.65 per share.
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