SoftBank Group is debating a new strategy to go private by gradually buying back outstanding shares until founder Masayoshi Son has a big enough stake he can squeeze out the remaining investors.
The approach would likely take more than a year and would mean the Japanese company continues to sell assets to fund successive buybacks, according to people familiar with the matter.
Mr Son would not buy more shares himself, but his ownership stake, now about 27 per cent, would increase as other investors sell stock. Under Japanese regulations, Mr Son could compel other shareholders to sell when he gets to 66 per cent ownership, perhaps without paying a premium, the people said.
One advantage of the plan, which insiders have called a “slow-motion” or “slow-burn” buyout, is that it gives SoftBank flexibility to purchase its own stock when it dips, according to the people. In the case of a formal buyout, it would have to pay a premium, likely of around 25 per cent. Shareholders are also likely to support buybacks, especially since the company continues to trade at a discount to the total value of its holdings in companies from Alibaba and Uber to DoorDash.
The billionaire said as recently as February he thought SoftBank was better off as a public company. More recently, he has declined to comment on his plans after reports about a possible buyout in publications, including Bloomberg News.
“If our shares drop down, I will buy back more shares more aggressively,” Mr Son said at a conference in November. SoftBank declined to comment for this story.
Shares rose as much as 6.7 per cent after Bloomberg’s report.
Mr Son has debated the idea of going private off and on for at least five years. Even with SoftBank’s market capitalisation at about $50 billion and its assets worth three times that, banks proved hard to convince. They offered unfavorable terms, torpedoing the talks, a person involved in the negotiations has said.
Instead, Mr Son unveiled plans to sell about $43bn in assets to pay down debt and buy back stock. By June, he had offloaded $13.7bn of Alibaba stock, an even larger chunk of its stake in T-Mobile US and some shares of SoftBank, his Japanese telecommunications unit. He then went even further, announcing the sale of Arm to Nvidia for about $40bn, slashing the stake in SoftBank by about a third and selling a controlling shareholding in phone-distribution company Brightstar.
Mr Son says he is now sitting on $80bn in cash. The robust initial public offering market has also given SoftBank some big gains on investments, including China’s KE Holdings and DoorDash.
SoftBank’s market value has surged however, with a rally of more than 160 per cent since its low in March. The value of the stock outside of his control is about $87bn.
SoftBank is not obligated to publicly disclose buyout plans, unless it takes concrete steps like setting up a special committee to review the bid or getting letters of intent from the banks for financing, according to one of the people familiar. The disclosure rules in Japan, where management buyouts are rare, have gray areas that would give SoftBank room to maneuver, the person said.
Mr Son may still do a traditional management buyout if the share price falls below a certain level, one of the people said, declining to give specific numbers. Elliott, SoftBank’s biggest external shareholder, would take part, provided the stock is still trading at a discount to its underlying value, according to a different person. The Japanese conglomerate is also less leveraged today and a much easier vehicle to lend to for the banks than it was in March, the person said.
After repurchasing 1.35 trillion yen ($12.95bn) of shares this year, SoftBank holds about 12 per cent of outstanding stock. Mr Son controls about 26.8 per cent through various entities. The company has already announced plans to buy back 1.5 trillion yen more through July of next year. At yesterday’s closing price, that would increase Son’s share to less than 35 per cent, a long way to go until a decisive majority.
Some analysts are skeptical Mr Son would pursue a buyout now given such challenges – and his propensity to use any cash he has for ambitious deals.
“Until this year, Son has shown little appetite for tackling the discount with buybacks,” said Atul Goyal, senior analyst at Jefferies. “Are we supposed to believe that he will now spend years and all of SoftBank’s cash on this scheme, instead of doing what he really loves – making big bets in the tech space?”
The problem with a slow-burn MBO strategy is that the buybacks are likely to raise the cost of the eventual deal, according to Mr Goyal. Even if Mr Son manages to raise his personal stake in the company to 66 per cent, Mr Goyal is not convinced he will be able to pull off the buyout without a challenge from minority shareholders.
Many inside SoftBank are also against the idea of going private. The sheer amount of cash required is one obstacle. Going private is also likely to cause blowback from credit-rating agencies, making the refinancing of billions of dollars in corporate bonds more difficult, one person said. A buyout would actually prevent Mr Son from doing big deals for as long as a year and a half, one factor giving him second thoughts, a different person said.
In February, when he addressed the idea of a buyout, Mr Son said he decided against pursuing a deal after giving it serious consideration. Keeping SoftBank public would allow shareholders to participate in the company’s growth and enforce management discipline, including transparency, he said at the time.
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Hydrogen: Market potential
Hydrogen has an estimated $11 trillion market potential, according to Bank of America Securities and is expected to generate $2.5tn in direct revenues and $11tn of indirect infrastructure by 2050 as its production increases six-fold.
"We believe we are reaching the point of harnessing the element that comprises 90 per cent of the universe, effectively and economically,” the bank said in a recent report.
Falling costs of renewable energy and electrolysers used in green hydrogen production is one of the main catalysts for the increasingly bullish sentiment over the element.
The cost of electrolysers used in green hydrogen production has halved over the last five years and will fall to 60 to 90 per cent by the end of the decade, acceding to Haim Israel, equity strategist at Merrill Lynch. A global focus on decarbonisation and sustainability is also a big driver in its development.
The specs: 2019 Infiniti QX50
Price, base: Dh138,000 (estimate)
Engine: 2.0L, turbocharged, in-line four-cylinder
Transmission: Continuously variable transmission
Power: 268hp @ 5,600rpm
Torque: 380Nm @ 4,400rpm
Fuel economy: 6.7L / 100km (estimate)
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The biog
Name: Salem Alkarbi
Age: 32
Favourite Al Wasl player: Alexandre Oliveira
First started supporting Al Wasl: 7
Biggest rival: Al Nasr
Retail gloom
Online grocer Ocado revealed retail sales fell 5.7 per cen in its first quarter as customers switched back to pre-pandemic shopping patterns.
It was a tough comparison from a year earlier, when the UK was in lockdown, but on a two-year basis its retail division, a joint venture with Marks&Spencer, rose 31.7 per cent over the quarter.
The group added that a 15 per cent drop in customer basket size offset an 11.6. per cent rise in the number of customer transactions.
Company Fact Box
Company name/date started: Abwaab Technologies / September 2019
Founders: Hamdi Tabbaa, co-founder and CEO. Hussein Alsarabi, co-founder and CTO
Based: Amman, Jordan
Sector: Education Technology
Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed
Stage: early-stage startup
Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.
The Breadwinner
Director: Nora Twomey
Starring: Saara Chaudry, Soma Chhaya, Laara Sadiq
Three stars
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How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Results
2pm: Maiden (TB) Dh60,000 (Dirt) 1,200m, Winner: Mouheeb, Tom Marquand (jockey), Nicholas Bachalard (trainer)
2.30pm: Handicap (TB) Dh68,000 (D) 1,200m, Winner: Honourable Justice, Royston Ffrench, Salem bin Ghadayer
3pm: Handicap (TB) Dh84,000 (D) 1,200m, Winner: Dahawi, Antonio Fresu, Musabah Al Muhairi
3.30pm: Conditions (TB) Dh100,000 (D) 1,200m, Winner: Dark Silver, Fernando Jara, Ahmad bin Harmash
4pm: Maiden (TB) Dh60,000 (D) 1,600m, Winner: Dark Of Night. Antonio Fresu, Al Muhairi.
4.30pm: Handicap (TB) Dh68,000 (D) 1,600m, Winner: Habah, Pat Dobbs, Doug Watson
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
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The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
JAPAN SQUAD
Goalkeepers: Masaaki Higashiguchi, Shuichi Gonda, Daniel Schmidt
Defenders: Yuto Nagatomo, Tomoaki Makino, Maya Yoshida, Sho Sasaki, Hiroki Sakai, Sei Muroya, Genta Miura, Takehiro Tomiyasu
Midfielders: Toshihiro Aoyama, Genki Haraguchi, Gaku Shibasaki, Wataru Endo, Junya Ito, Shoya Nakajima, Takumi Minamino, Hidemasa Morita, Ritsu Doan
Forwards: Yuya Osako, Takuma Asano, Koya Kitagawa
