SoftBank to pay $1bn for majority Brightstar stake
SoftBank, the acquisitive Japanese telecoms group, has added to its growing stable of U.S. businesses by agreeing to pay $1.26bn for a majority stake in Brightstar, a New York-based distributor of mobile phones.
SoftBank's purchase of the privately held company, announced on Friday, follows its $21.6bn acquisition of Sprint earlier this year.
The Japanese group and its billionaire founder, Masayoshi Son, are looking to win over U.S. mobile customers by applying the same aggressive pricing strategy that has worked for the group in Japan. Brightstar could further that aim by giving it greater scale as a hardware buyer and, with that, more power to negotiate with manufacturers.
"By making Brightstar a subsidiary, SoftBank aims to strengthen its purchasing scale for mobile devices and further increase competitiveness both in Japan and the U.S.," SoftBank said in a statement.
Under the terms of the deal, SoftBank will take a 57 per cent interest in Brightstar before increasing its control to 70 per cent over the next five years.
Marcelo Claure, Brightstar's founder and chief executive, will retain 43 per cent ownership in the company at first, but his stake will decline as SoftBank's increases.
(Read more: Japan's Softbank cleared to buy Sprint Nextel)
Brightstar sources phones and tablet computers from manufacturers on behalf of telecoms providers, and has operations in 50 countries, according to statements by the company and SoftBank. Under the deal with SoftBank, it will become the exclusive handset provider for Sprint and possibly other SoftBank group companies.
Brightstar also acts as a wholesaler for major Sprint rivals, including Verizon Wireless, AT & T and T-Mobile. John Jackson, an analyst at IDC, a research group, said SoftBank would need to share at least some of the benefits of its newfound purchasing scale with those groups to keep them from taking their business elsewhere.
"I would certainly think the existing Brightstar customers will want to review their situation," Jackson told Reuters. "None of this will have been lost on SoftBank. The whole model falls down without the scale of the other operators."
Brightstar generated earnings before interest, taxes, depreciation and amortisation of about $260m during the year that ended in June, on revenues of more than $7bn, the company said. SoftBank's investment values the company at $2.2bn, or 8.5 times its pre-deduction earnings.
The companies said they expected the deal to close by the end of the year, pending approval from regulators.
The deal came just a few days after SoftBank announced that it was spending $1.5bn for a 51 per cent stake in the Finnish mobile-games maker Supercell, valuing the three-year-old producer of hits such as Clash of Clans at $3bn.