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By Pavel Alpeyev September 7, 2021

  •  Deutsche Telekom swaps own stock for SoftBank’s T-Mobile stake
  •  Japan’s SoftBank to retain a 3.3% stake in the U.S. carrier

SoftBank Group Corp. surged the most in nine months after unveiling a deal to acquire 4.5% of Deutsche Telekom AG and sell part of its stake in T-Mobile US Inc. to the German telecommunications carrier.

The Japanese investment giant announced a complicated deal under which it will swap T-Mobile shares for an initial 225 million shares of Deutsche Telekom. Separately, the telecom operator will then sell T-Mobile Netherlands for $6.1 billion, using $2.4 billion of those proceeds to pick up another 20 million T-Mobile shares, the companies said in a statement.

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SoftBank soared 9.9%, its most since December. Founder Masayoshi Son, who acquired Sprint Corp. in 2013, had originally planned on buying T-Mobile. The idea was to take on AT&T Inc. and Verizon Communications Inc. in the U.S., but Son was forced to abandon the effort amid pressure from regulators. In the meantime, T-Mobile overtook Sprint as the country’s third-largest carrier and instead acquired its smaller rival last year, leaving Son with a 25% stake in the new company.

“It’s possible that people are speculating that the $2.4 billion in cash could be used for a buyback,” said Kirk Boodry, an analyst at Redex Research in Tokyo. “There may be also an element of SoftBank being oversold, as there has not been any good news at all in the last two months.”

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Under the swap agreement, Deutsche Telekom plans to exercise call options granted under a 2020 deal to acquire about 45 million T-Mobile shares, issuing 225 million new shares to SoftBank in exchange, Tokyo-based SoftBank said in a statement on Tuesday. The German company will then acquire additional T-Mobile stock after it completes the sale of the Netherlands unit.

At the end of the transactions, SoftBank will end up with 4.5% of Deutsche Telekom and about a 3.3% slice of T-Mobile, which could rise to 6.9% contingent on the U.S. carrier hitting certain milestones. 

Last year, Son unloaded part of its holdings in T-Mobile in a $21 billion deal that helped pay for a record buyback of SoftBank’s own shares. The Japanese company has also pledged $13.3 billion of T-Mobile shares for a $4.38 billion margin loan. SoftBank said in the statement it will be able to use Deutsche Telekom and T-Mobile shares as collateral for “financing and hedging purposes.”

Deutsche Telekom’s management will support the appointment of SoftBank Chief Operating Officer Marcelo Claure to its supervisory board at the next annual general meeting. Claure also serves as a director at T-Mobile.

— With assistance by Vlad Savov