Sprint Nextel Corporation (NYSE:S), Softbank merger amendment unanimous
Today, Sprint Nextel Corporation (NYSE: S) and SoftBank Corp announced that there is now an amendment in the merger agreement that had been previously announced between them. The objective of the agreement was that Sprint stockholders would receive a greater cash consideration as well as increased certainty. There has been a unanimous approval from Sprint Nextel Corporation’s Special Committee and its Board of Directors for amendment of the Merger Agreement. The recommendation to stockholders is that they should vote in favor of the amended transaction. Both companies anticipate that the SoftBank transaction will be sealed in the first-half of July 2013.
Is a merger an acquisition?
Although merger and acquisition are very frequently used in the same breath, the difference between them is a subtle yet distinct one. In a merger, two companies combine to form a new, jointly-owned entity.
Post the merger, stocks of both the companies are surrendered and entirely new stocks with the new company name are issued. More often than not, a merger takes place between companies that are more or less of the same stature in terms of size and standing and in such cases is referred to as a “Merger of Equals”.
An acquisition on the other hand is different. One firm takes over the other firm, establishes its power and is single owner .The firm that actions the takeover is generally the larger one with more muscle. The existence of the comparatively less-powerful firm is lost and the former operates the whole business under its own banner. In an acquisition, stocks of the firm that has been acquired are not surrendered. Instead, prior to the acquisition, the public buys them and their trading at the stock market continues.
When “friendly terms” matter
Another angle is that a deal that takes place on friendly terms is referred to as a merger, irrespective of whether it is a buy-out or not. On the other hand, if the deal is an unfriendly one and the stronger firm engulfs the target firm despite its willingness to be bought-out, it turns into an acquisition. In the case of
Sprint Nextel Corporation (NYSE:S), the merger will prove to be profitable to the company and its investors alike.