Top Rainmakers Win Big Rewards in a Challenging 2012

Institutional Investor
January 10, 2013


Jeff Sine Named to Institutional Investor’s “Rain Makers of the Year” list

For Masayoshi Son, the deal-obsessed Japanese entrepreneur behind telecommunications-media conglomerate SoftBank Corp., his $20.1 billion acquisition of U.S. cellular carrier Sprint Nextel Corp. is the boldest stroke yet in a daring career — a highly leveraged megabet on a distant No. 3 provider that has lost $41 billion in the past five years. For Jeffrey Sine, co-founder of New York technology, media and telecom boutique bank Raine Group, it’s a triumph of old-fashioned relationship banking.

Son is Japan’s second-richest man, with a net worth of $7.2 billion, according to Forbes. Sine, 55, has advised him on U.S. acquisitions since the mid-1990s. Then a banker at Morgan Stanley, Sine steered Tokyo-based SoftBank’s $2.1 billion purchase of U.S. publisher Ziff Davis, among other acquisitions. SoftBank sold out of these at a fat profit during the tech bubble’s peak in 1999. In 2001, Sine jumped to UBS as global head of TMT. He took Son along as a client, helping the billionaire with his interlinked investments in Yahoo, Yahoo Japan and Chinese Internet powerhouse Alibaba Group.

Sine left UBS in 2009 to start Raine with former Goldman Sachs Group partner Joseph Ravitch. Son started getting the itch to take a giant step in cellular about a year ago, sources say. That meant many late-night calls for Sine and his team as they presented their client with options from around the world. Meanwhile, Overland Park, Kansas–based Sprint was holding parallel talks with other whale investors, such as Mexican magnate Carlos Slim. The sale to SoftBank was announced on October 14.

The transaction gives Sprint $8 billion in capital it needs to catch up with dominant players Verizon Communications and AT&T. It also sidesteps New York Stock Exchange and Securities and Exchange Commission restrictions that might apply to a huge U.S. takeover by a foreign investor: In October, SoftBank paid $3.1 billion for Sprint bonds convertible into a 19.65 percent stake in Sprint, just below the 20 percent threshold for new issuance that would require a shareholder vote under NYSE rules. After obtaining regulatory and shareholder approvals, SoftBank will acquire 55 percent of Sprint’s currently outstanding shares for $12.1 billion and spend $4.9 billion to buy newly issued shares. The deal, due to close in mid-2013, will leave SoftBank owning 70 percent of the U.S. company.

Such largesse will require SoftBank to raise lots of money. That’s the job of the deal’s second key player, Son’s longtime financial backer Mizuho Bank. Mizuho talked two other Japanese institutions and Deutsche Bank into joining it in a $20 billion credit line for SoftBank to backstop the Sprint acquisition. Deutsche and Mizuho were co-advisers to SoftBank, so they and Raine will split a fee pot estimated at $45 million. Citigroup, Rothschild and UBS advised Sprint.

Investors’ first reaction to the massive leverage was negative. SoftBank’s Japanese shares plunged nearly 30 percent, to ¥2,268 ($28.79), in the ten days before the deal’s announcement but had regained it all by late November. Son’s backers contend he can repeat the success that followed his $15 billion purchase of Vodafone Japan in 2006. Like Sprint, that carrier was a struggling No. 3 in its market. SoftBank’s management made it a flourishing No. 2.