Softbank Group agreed a deal to acquire ARM Holdings Plc (ADR)(NASDAQ:ARMH) for over $32 billion, causing shares of Sprint Communications Inc to drop by a massive 7% on Monday and by 10% on Tuesday. Softbank is the majority shareholder at Sprint.
The first UK’s mega deal after Brexit
This deal is said to be the first principal cross-border deal in Britain since it left the European Union. The deal comes at a time when there has been a lot of speculation on what trade would be like after Brexit. The acquisition has also been reported as the largest investment by Softbank, as the Japanese telecommunications conglomerate now targets the Internet of Things, as it envisions a future full of interconnected devices.ARM Holdings chips are used by major phone manufacturers like Apple Inc.(NASDAQ:AAPL) and Samsung Electronics Co Ltd (KRX:005930), among others.
Sprint shareholders had a different thought
Sprint shareholders were taken by surprise by the move, since they had thought that Softbank would use the proceeds from the sale of its Alibaba Group Holding Ltd (NYSE:BABA) and SupercellOy stakes to buy more Sprint shares. The move also means that Softbank is not planning to buy the 17% stake of Sprint by other investors and make it private. It does not also seem likely that Softbank will be a major participant in an effort to combine T-Mobile US Inc (NASDAQ:TMUS) with Sprint, if that comes to pass.
Sprint is already having financial problems, and it has struggled to beat its rivals AT&T Inc. (NYSE:T), T-Mobile US Inc (NASDAQ:TMUS) and Verizon Communications Inc.(NYSE:VZ). Currently, it has a debt of $33 billion, and the feeling was that Softbank would offset this debt, according to Wells Fargo & Co (NYSE:WFC).