Softbank agrees T-Mobile exit in share sale, call option with Deutsche Telekom

Softbank Group has agreed to reduce its stake in T-Mobile US, selling around two-thirds of its stake to its co-shareholder Deutsche Telekom. It also gave the German operator a call option on most of its remaining shares in T-Mobile. Telekom plans to sell on the initial Softbank shares through a rights offering and trust securities. 

Softbank is transferring in total 198 million of its 305 million shares in the US mobile operator to T-Mobile. The latter will sell up to 30 million of the shares as securities of a newly established trust, which will invest in US treasury bonds to pay out quarterly distributions. The trust's holdings will be exchanged for cash in June 2023, based on the T-Mobile share price. 

For every share sold by T-Mobile to the trust, T-Mobile has agreed to repurchase one share from SoftBank for a consideration equivalent to that received by T-Mobile in its sales. Consequently, the offering will not involve any cost or profit to T-Mobile and will not affect the number of outstanding shares it holds. 

In addition, T-Mobile will sell up to 143.6 million of the Softbank shares in a public offering and distribute purchase rights for up to 19.75 million shares to its existing shareholders. 

Proceeds from the share sales will go to Softbank. The Japanese company also agreed to refund T-Mobile's costs for the offerings and pay it USD 300 million. Following the deal, Softbank's position on the T-Mobile board will drop to one director from four. 

The call option on its remaining shares can be exercised until June 2024. The strike price is based on the lower of T-Mobile's share price on 19 June or the average price achieved in the public offering for 44.9 million of the shares and the average price over the 20 days prior to exercising the option for the remaining 56.6 million shares. 

The deal leaves Deutsche Telekom as the controlling shareholder in T-Mobile with an around 43 percent stake, with a much larger free float for T-Mobile shares. Softbank plans to use the proceeds from the sale to finance its share buyback and debt reduction.