A Kansas judge will spend the weekend weighing a request to delay next week’s shareholder vote on Sprint Nextel Corp.’s $20.1 billion deal with SoftBank Corp.
Johnson County District Judge Thomas M. Sutherland presided over three hours of argument Friday from attorneys representing Sprint, SoftBank and shareholders who want to push back the vote. Sutherland said he would rule before Wednesday’s scheduled vote.
Separately, Sprint’s stock price fell more than 1 percent Friday on reports that SoftBank was discussing alternative plans involving T-Mobile USA Inc. Reuters based its report on three sources it said were familiar with the talks.
Reuters said the Tokyo company was talking with T-Mobile’s parent company, Deutsche Telekom AG, about a “plan-B” deal. T-Mobile is the fourth-largest U.S. wireless carrier, behind No. 3 Sprint.
Sprint shares fell 10 cents and closed at $7.24.
SoftBank and Sprint struck their deal last October. It would give the wireless carrier 70 percent ownership of Sprint.
Sprint, however, continues to negotiate with satellite television company Dish Network Corp. over its alternative proposal to buy all of Sprint for $25.5 billion.
A group of Sprint shareholders has asked Sutherland for a temporary injunction to slow the process. In the hearing, they argued that Sprint needed the time to secure a binding offer from Dish and evaluate it for shareholders before asking them to vote on the SoftBank agreement.
“We’re asking for a short delay,” the shareholders’ attorney Mike Barry said during the hearing. “Let them explain to shareholders what the substance of these talks is.”
Sprint’s attorney Rob Saunders countered that the pending vote gave Sprint leverage in its negotiations with Dish. Sprint’s board, and not the court, should decide when to hold the vote, he said.
“Don’t pull the rug out from under us,” Saunders told Sutherland at the end of the hearing.
Sutherland, who has viewed reams of sealed documents provided by both sides in the case, said he would take the arguments under consideration. .
During the session, Sutherland challenged each side on points he considered important to his ruling.
Barry, the shareholders’ attorney, had contended that Sprint’s agreement with SoftBank was unfair to existing shareholders. Its terms ensure that SoftBank would collect billions of dollars under a sale to another bidder at the expense of existing shareholders.
The provision also precluded a rival bidder from stepping in with an offer, Barry argued.
Sutherland noted that he must judge the agreement based on the circumstances when it was reached, not now.
“It’s not like people were standing in line to make a bid for Sprint,” Sutherland said in reference to last October when Sprint agreed to the SoftBank deal.
Sprint argued at the hearing that Dish specifically passed when asked in September about its interest.
The judge also pointed out to the shareholders’ attorney that Dish’s subsequent bid shows that the terms of the SoftBank deal haven’t kept out rivals.
Barry said Sprint’s board owed shareholders its opinion on whether Dish’s offer was superior to SoftBank’s.
“Let them answer the question,” Barry said. “That’s the reason to delay the vote.”
Sutherland confronted Sprint’s attorney with two challenges.
“I can’t get over this feeling that common sense dictates Sprint take a step back and let the Dish deal be considered and then hold a vote,” the judge said.
Saunders agreed but said it should be Sprint’s board that decides when to hold a vote, not the court. He said the court cannot negotiate with Dish, for example, in setting a deadline to make a final offer, though the board can.
The judge also said he was not sure he was persuaded that delaying the vote would breach the agreement with SoftBank and allow it to walk away.
Saunders replied Sprint didn’t think so either, but SoftBank did, and that injected uncertainty that Sprint’s board should weigh in deciding about the vote.
Sprint’s attorney acknowledged during the hearing that if shareholders approved the SoftBank deal next week, Dish’s bid would die.
Sutherland, alternatively, asked whether the SoftBank deal would be dead if shareholders vote no, perhaps hoping to then get a firm offer from Dish.
Erik Olson, an attorney representing SoftBank at the hearing, said not necessarily. Sprint and SoftBank could agree to extend the deal, but each would be free to walk away.