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SoftBank Buybacks Raise Prospect of Management Buyout, Analyst Says

SoftBank Buybacks Raise Prospect of Management Buyout, Analyst Says

SoftBank Group Corp. has been repurchasing so much of its own stock that a management-led deal to take the company private is looking feasible, a Tokyo-based analyst said.

SMBC Nikko Securities Inc. analyst Satoru Kikuchi mentioned the prospect in response to investor questions about the company’s new asset management company. SoftBank shares have fallen about 10% this week following reports of its bets on tech stock derivatives.

The buyout idea dates back to at least 2015, when founder Masayoshi Son was said to have entered talks with an overseas partner on a deal that was eventually scrapped over a disagreement on financing. Son, who has tried relentlessly to raise the value of SoftBank shares over the years, said last month that the company was considering the sale of some or all of its stake in chip-design firm Arm Ltd. Since March, SoftBank has announced a string of buybacks totaling 2.5 trillion yen ($24 billion).

“The firm seems to be selling off assets rapidly and is considering the sale of its ARM holdings earlier than initially planned,” Kikuchi wrote in a note Wednesday. “Given the scale of its buyback operations, we think delisting via management buyout is a possibility.”

SoftBank didn’t immediately respond to a request for comment on the possibility of a buyout.

Between the stake held by Son himself and the treasury shares SoftBank has already bought back, about 30% of the company’s stock is already controlled by management, according to Bloomberg-compiled data.

Kikuchi said that the post-tax value of the assets SoftBank plans to sell is more than 10 trillion yen larger than its net interest-bearing debt, and that SoftBank shares are trading below their book value, after taking into account unrealized gains on its holdings in Alibaba Group Holding Ltd.

The Financial Times reported in March that Son had explored another attempt to take the company private, holding talks with investors including Elliott Management Corp. and Abu Dhabi’s sovereign wealth fund. The paper said he instead decided to embark on his current plan of selling 4.5 trillion yen of assets to repurchase shares and repay debt.

©2020 Bloomberg L.P.