Softbank Corp, Japan's second-largest Internet access provider, agreed to buy Vodafone Group Plc's Japanese mobile-phone unit for ¥1.8 trillion (US$15.4 billion) in Asia's biggest leveraged buyout.
Softbank may use "leverage" for as much as ¥1.2 trillion for the purchase, which gives the company 15 million customers, billionaire founder Masayoshi Son told a press conference in Tokyo today. Vodafone will return ¥6 billion (US$10.5 billion) to shareholders and raised its earnings outlook.
The acquisition gives Son a network to compete against NTT DoCoMo Inc and KDDI Corp in a ¥8.5 trillion mobile phone market, where customers are tapping online services such as video downloads, share trading and auctions. Vodafone, the world's biggest cell-phone company, sold the unit after more than ¥2 trillion of spending failed to increase earnings.
"Softbank will be able to get a subscriber base immediately," said Koji Uchida, who helps manage US$1.3 billion in Japanese equities at UFJ Partners Asset Management Co in Tokyo. "There is potential for Vodafone's business to be revitalized, but it won't be easy and will be costly."
Shares of Softbank rose 4 percent to ¥3,140 today on the Tokyo Stock Exchange. Vodafone shares rose as much as 4.6 percent to ¥1.36.
Vodafone K.K., with a 17 percent market share, lags behind its two rivals in network coverage and subscriber growth.
Profits have been shrinking as the company invests in infrastructure and offers discounts to attract customers.
The Japanese unit's operating profit fell 55 percent to ¥423 billion in the six months to Sept. 30, and its profit margin before interest, tax, depreciation and amortization dropped 6 percentage points to 22 percent.
"Selling the Japanese unit is a good move by Vodafone and the direct result of a lot of investor pressure to perform better," said Pieter Wind, who oversees about US$12 billion as head of securities at ING Private Banking in Amsterdam, including Vodafone shares.
Newbury, England-based Vodafone, the world's biggest mobile-phone company, on Feb. 27 cut its sales growth forecast to 5 percent to 6.5 percent in the fiscal year through March next year, from this year's 6 percent to 9 percent target, amid stiffer competition and falling prices.
The company also said it will write down the value of assets by as much as ¥28 billion. Most of the writedown will affect Vodafone's German unit, created through the US$186 billion purchase of Mannesmann AG in 2000 and also Italy and probably Japan, the company said at the time.
Vodafone K.K. also attracted a bid from Cerberus Partners LP, a US buyout firm that has invested US$8 billion in Japan.
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