Sprint Trades Higher After Revising Merger Agreement With T-Mobile

Telecom companies Sprint Corp S and T-Mobile Us Inc TMUS revised the financial terms of their merger agreement Thursday. 

Deutsche Telekom Takes Higher Stake

Sprint shareholders will receive the same exchange ratio as part of the merger agreement, which was settled at 9.75 Sprint shares for one T-Mobile share.

But in a separate arrangement, Sprint's majority owner SoftBank Group Corp - ADR SFTBY will see an exchange ratio of 11 Sprint shares for each T-Mobile share.

The net result is SoftBank owning 24% of the combined entity, while Deutsche Telekom, the majority shareholder of T-Mobile, will own 43% of the new company.

Deutsche Telekom and SoftBank did not want to make changes to the shareholder exchange ratio because it would be contingent on another round of shareholder voting, which could take months to complete, sources told CNBC.

Instead, SoftBank agreed to allow Deutsche Telekom to hold a higher ownership stake, as Sprint's financials worsened throughout the deal approval process, the report said. 

A Provision For SoftBank

The revised terms do come with a condition that would benefit SoftBank.

If the merged company's stock valuation reaches $150 per share between 2022 and 2025, SoftBank will be able to reclaim its original percentage of shares back.

T-Mobile, Sprint Could Merge As Soon As April 1 

The T-Mobile and Sprint deal remains subject to several closing conditions but the companies said it is on track to close as early as April 1.

The revised terms will have no impact on T-Mobile's outlook and guidance related to synergy, long-term profit and cash generation, according to the press release. 

Sprint shares were trading 6.38% higher at $10.10 at the time of publication Friday, while T-Mobile shares were down 0.52% at $98.98. 

Related Links:

Can You Hear It Now? Everything To Know About The Sprint, T-Mobile Merger

Trading The Sprint-T-Mobile Merger: PreMarket Prep Recap For Feb. 11, 2020

Photo by Chris Potter via Wikimedia.