In the last trading session, the stock of Sprint Corp (NYSE:S) spiked more than 6% to close the day at $8.20. The green close came on the reports that the company is in active talks about a merger with T-Mobile US Inc (NASDAQ:TMUS). Both firms and their parents, have been in frequent discussions about a stock-for-stock deal in which T-Mobile parent firm Deutsche Telekom would surface as the majority owner.
Negotiations are ongoing and there is no surety of the two parties reaching a deal anytime soon. The two firms have yet to set an exchange ratio for merger, but are currently engaged in discussions to strike out a term sheet.
Sprint and T-Mobile have had an apparently endless relationship over the years since Softbank acquired Sprint, pushed by the outlook of huge amount in cost synergies related to a merger. The last time the two firms held meaningful discussions earlier this year, Softbank’s Masayoshi Son showed a readiness to sell Sprint to T-Mobile.
This time, considering the all-stock nature considered, Softbank would surface as a large minority holder in any arrangement. While John Legere, the CEO of T-Mobile is anticipated to lead any arrangement that results from a deal, Son has made it evident he needs a say in how the firm is run. That longing adds another layer of intricacy to an already tough deal. T-Mobile has not started due diligence on Sprint, yet another measure that could change prevailing price expectations or the readiness to move forward.
The biggest concern is whether any deal between the number three and number 4 wireless carriers in the country would be permitted by antitrust regulators. The risk of denial by the Department of Justice will play a vital role in the final decision taken by both sides in respect to the development of deal.