SoftBank shares open 12.5% higher after T-Mobile-Sprint merger approval

TOKYO (Reuters) – SoftBank Group Corp shares opened 12.5% higher on Wednesday morning after a federal judge approved the takeover of its U.S. wireless unit Sprint Corp by T-Mobile US Inc.

A deal would allow SoftBank, which reports its earnings on Wednesday, to offload a troubled asset when its other tech bets are facing investor scepticism and it is struggling to raise funds for a successor to its $100 billion Vision Fund.

A federal judge rejected a claim by a group of states that the proposed T-Mobile-Sprint merger would violate antitrust laws and raise prices.

One of SoftBank founder and CEO Masayoshi Son’s big overseas bets, Sprint has weighed down the group as it struggles to compete with bigger rivals.

The news sent Sprint shares soaring 78%, with T-Mobile shares climbing 12%.

“This is obviously great news for Sprint… It is better news for SoftBank,” wrote Kirk Broody, an analyst for Redex Holdings, in a note on the Smartkarma platform.

A deal would remove the risk of SoftBank having to inject further funds in the carrier, Broody wrote, although T-Mobile may push for better terms given Sprint’s relative weakness.

The approval is the latest news to boost SoftBank’s share price, which is up 20% year-to-date, after last week sources said activist fund Elliott Management has amassed a stake of almost $3 billion in SoftBank and is pushing for changes including $20 billion in stock buybacks.

SoftBank is expected to report a 20% fall in operating profit in the October-December quarter when it reports later on Wednesday, as the performance of its Vision Fund’s tech bets continue to weigh on the group.

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