Reports: Sprint Nearing $40 Bln Deal To Acquire T-Mobile US

(RTTNews) - Wireless carrier Sprint Corp. (S) is nearing a deal to acquire T-Mobile US, Inc. (TMUS) for about $40 per share in cash and stock that would most likely be targeted by anti-trust regulators, according to media reports on Wednesday. The deal, which values T-Mobile at about $32 billion, is expected to be formally announced in early July.

The companies are said to have agreed on a broad outline for the terms and conditions of a merger and are working towards a formal contract.

The offer price of $40 per share represents a 16.7 percent premium over T-Mobile's closing share price of $34.28 on Wednesday. According to reports, Sprint will fund the deal by paying half in stock and half in cash. The deal would reportedly be worth about $40 billion, including $8.7 billion in net debt that has been amassed by T-Mobile.

The deal will also reportedly include a $1 billion breakup fee that Sprint will pay T-Mobile should the deal not go through. However, Sprint wanted to avoid agreeing to a high termination fee because it could provide regulators with an incentive to reject the deal.

Sprint reportedly met with six banks in April to ensure debt that the lenders would be ready with financing structures when it decides to launch an offer. The six banks include Goldman Sachs Group, Inc. (GS), Citigroup, Inc. (C), JPMorgan Chase & Co. (JPM), Mizuho Financial Group, Inc. (MFG), Bank of America Corp. (BAC) and Deutsche Bank AG (DB).

Bellevue, Washington-based T-Mobile US was created in 2013 through a combination of T-Mobile USA, Inc. and MetroPCS Communications, Inc. that began trading on the NYSE on May 1, 2013.

Meanwhile, Sprint Corp. was formed following the $21.6 billion merger of Sprint Nextel Corp. and Japan's third-largest mobile carrier Softbank Corp. (SFTBF, SFTBY) in July 2013.

SoftBank currently owns more than 80 percent of Sprint, while Germany's Deutsche Telekom AG (DTEGY) owns 67 percent of T-Mobile. If the current deal goes through, Deutsche Telekom would retain a stake of 15 to 20 percent in the combined entity. Softbank Chairman Masayoshi Son has long been eager to buy T-Mobile and merge it with Sprint.

The proposed deal will see the merger of the third- and fourth-largest wireless carriers in the U.S. to create a company large enough to challenge the market dominance of Verizon wireless and AT&T, Inc. (T).

However, the deal would likely face serious scrutiny from regulators mainly because of antitrust concerns as it could raise prices for consumers. The U.S. Federal Communications Commission and the U.S. Justice Department have already raised concerns about the merger.

Sprint reportedly believes that the combination of Sprint and T-Mobile will be able to provide greater competition to Verizon and AT&T, the largest and the second-largest wireless carriers in the U.S. However, anti-trust regulators insist that at least four major national carriers are required to be maintained for healthy market competition. AT&T had to abandon its $39 billion bid to buy T-Mobile in 2011, as regulators tried to block the deal on antitrust concerns.

The proposed deal between Sprint and T-Mobile would extend a wave of consolidation among the largest companies in the telecom and media industries.

The regulators are currently reviewing the $45.2 billion deal agreed in mid-February between cable television operators Comcast Corp. (CMCSA, CMCSK) and Time Warner Cable, Inc. (TWC) as well as the $48.5 billion deal agreed in mid-May between AT&T and satellite broadcaster DirecTV (DTV).

S closed Wednesday's regular trading session at $9.40, down $0.10 or 1.05% on a volume of 12.16 million shares, but gained 4.47% in after hours trading. TMUS closed at $34.28, up $0.08 or 0.23% on a volume of 2.74 million shares and gained a further 1.37% in extended hours trading.