Shareholders of Sprint Nextel Corporation (NYSE:S) approve acquisition of Softbank

Posted by Steve Raasch June 26, 2013 0 Comment 2321 views

On Tuesday, Sprint Nextel Corporation (NYSE:S)’s shareholders approved SoftBank Corp.’s acquisition of the major portion of the company. Since April, Softbank was in competition with DISH, to acquire Sprint and the latter opted for Softbank’s $21.6B offer for 78% of the company against the $25.5B DISH bid for all of Sprint. Dan Hesse, the CEO said it was a significant day for the Sprint and that the deal will surely enhance the company’s position the market and its long-term value by creating a company that has greater financial flexibility.

The Japan-based Softbank has given Sprint stockholders the choice of $7.65 per share that is held by them or 1 share of the New Sprint common stock. Around 98% of the votes at the special shareholders meeting that was held by Sprint’s voted for the deal. This represented around 80% of the company’s common stock. The deal is scheduled to be closed by early July.

What is Financial Flexibility?

In simple words, it is a company’s ability to raise capital when it is going through rough weather. Typically companies do not have a problem with raising capital when sales are on the rise and the earnings are strong. During good times, the strong cash flow of a company makes it easy to raise capital. However, it is important for companies to be prudent when they raise capital in the good times. They should not stretch their capabilities too far. As long as a company maintains a lower debt level, the greater its financial flexibility will be.

For a company like Sprint, even with the backing of a company with muscle like Softbank, it is all the more critical for it to keep maintain low debt levels. The wireless industry is going through tumultuous times and competition is high. The minute investors in any company doubt the company’s ability to service any of its existing debt when the times are bad, it will be very difficult for the company to raise any debt capital. However, having the finances to expand its serves, improvise its technology and profit its customers and investors will now be an easier task for Sprint Nextel Corporation (NYSE:S).

About Steve Raasch

Steve Raasch is a breaking news reporter for GDP insider. During his nearly two decades of editorial experience, Steve has covered a variety of topics including small business, health, personal finance, advertising, workplace issues and consumer behavior. Steve is very passionate about his work. Steve earned a master of arts degree in international relations from the Johns Hopkins University School of Advanced International Studies in Washington.

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