By Jacky Wong
Taking SoftBank private may sound nice to its flamboyant founder Masayoshi Son. But carrying it out won't be easy.
Mr. Son's erratic investment style has never fit well with the scrutiny he has received as the chairman of a publicly listed company. The latest case in point: SoftBank's shares fell 10% in three days last week after reports revealing the company's massive option bets on tech stocks. Making SoftBank a private company would remove such visible volatility, especially since Mr. Son has long complained that the market has undervalued the company. The rumors of a management buyout have come up from time to time over the past few years though an actual buyout has never materialized.
Such rumors have resurfaced again: SMBC Nikko Securities, for example, said delisting SoftBank via a management buyout is a possibility in a research note last week. The company's recent asset sales lend some credence to the theory. SoftBank just announced a $40 billion deal to sell its chip unit Arm Holdings to Nvidia and priced its $10 billion sale of a 22% stake in its domestic telecom unit. SoftBank's shares jumped 9% Monday.
A private SoftBank would let Mr. Son carry out his sometimes baffling investment ideas more freely, but making it happen would require an enormous sum. SoftBank has a market value of $113 billion--not including its treasury shares--after Monday's surge. Excluding Mr. Son's nearly 30% stake, the buyer would still need to put up around $100 billion, assuming a 25% takeover premium. Part of that could be reduced with Softbank's cash, but Mr. Son will still likely need help from banks or private-equity investors to pull this off.
Low interest rates may make financing cheaper--though making SoftBank even less disciplined in its investments could give lenders pause. Similarly, private-equity funds may salivate at Softbank's discount to its net assets, but that would require them to have bigger say over asset sales, which contradicts the very reason for the company to go private.
There is an easier way to boost Softbank's share price. The market loved its decision in March to sell or monetize 4.5 trillion yen, equivalent to $42.39 billion, worth of assets to buy back shares and redeem debt, before its option bets unnerved investors.
More generous payouts would be an simpler--and perhaps more realistic--way to buy goodwill from shareholders.
Write to Jacky Wong at JACKY.WONG@wsj.com