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) 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%.

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