Sun Zhengyi increased his stake in SoftBank to 34.2%, a step closer to privatization

Masayoshi Son

Phoenix.com Technology News Beijing Dec. 8 news, SoftBank Group founder Masayoshi Son (Masayoshi Son) quietly tightened the control of the company during the stock market downturn, one step closer to the bid he can make the world’s largest technology investor The level of ownership for privatization.

SoftBank’s aggressive buyback strategy has reduced the company’s outstanding shares by nearly 90 million over the past two months, leaving Masayoshi Son with more than one-third of SoftBank’s shares. According to media calculations and Softbank’s confirmation, Masayoshi Son’s current stake in Softbank has risen from 32.2% at the end of September this year to 34.2%. In March 2019, Sun Zhengyi’s shareholding ratio was only 26.7%.

According to Japanese law, Masayoshi Son can obtain additional rights after his shareholding ratio exceeds one-third. The 65-year-old billionaire will have the power to veto any special resolutions that activist investors bring to shareholders, giving him more control over asset sales, partial buybacks, mergers and company charters.

At the same time, the increase in the stake also puts Son on track to achieve his goal of taking SoftBank private, an idea he has discussed several times within the company. A long-debated option to go private is the “slow-burn” strategy, in which stock is gradually bought back until the founders own enough shares to crowd out remaining investors. Under Japanese regulations, if Masayoshi Son owns 66 percent of SoftBank, he can force other shareholders to sell shares, and in some cases does not need to pay a premium.

Satoru Kikuchi, a senior analyst at SMBC Nikko Securities in Japan, believes that “SoftBank cannot find a reason why it should go public.” He said that SoftBank can raise the required funds without going public, without the restrictions and costs of listed companies, and “listing is not suitable for SoftBank’s current business model.”

A person familiar with Son’s thinking said he would take the company private if he could afford it. But many of Son’s lieutenants oppose going private because it would be a huge financial commitment that would drain management’s attention and leave the company short of cash for acquisitions and investments, another person familiar with the matter said.

Assuming Masayoshi Son needs to buy two-thirds of SoftBank, at SoftBank’s current market capitalization, the management buyout (MBO) price is about $50 billion, about the same amount that Michael Dell took Dell private in 2013. Twice as long. SoftBank’s cash flow will determine whether Son can secure favorable loan terms to finance any MBO deal. Separately, other asset sales that could quickly boost SoftBank’s cash position include the company’s stakes in Alibaba Group Holding, SenseTime and food delivery company DoorDash.

SoftBank’s privatization process also depends in part on the initial public offering (IPO) of SoftBank’s chip design subsidiary ARM next year. SoftBank hopes to seek a valuation of as much as $60 billion for ARM at the time of the IPO, almost double the value it acquired when it bought the company in 2016. If that valuation can be achieved, such a return would not only fund SoftBank’s investment machine, but also start the road to privatization.

Kikuchi pointed out that privatization “is not something that will happen tomorrow”. “But if you’re talking about next year or the year after that, it seems credible,” he said. (Author/Xiao Yu)

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