Softbank Group is behind the success of a lot of companies at present. While its heavy investments have made the Japanese software giant a formidable corporate group with an estimated market value of about $68 billion, it has also contributed to huge debt which stood at 11.9 trillion yen ($107 billion) at the end of March this year.
To tackle the same and improve its balance sheet, Softbank Group is planning to sell its stakes in few companies, most important being Chinese retail giant Alibaba and game firm GungHo.
Last week, the firm announced the sale of shares in Alibaba for the first time in 16 years since it invested in 2000. It plans to raise a total of $10 billion by selling Alibaba shares. It will retain 28% of its stake in Alibaba after the sale as compared to 32.2 % shares in March this year.
Continuing its divestment strategy, Softbank now plans to raise 73 billion yen ($685 million) by selling 248.3 million shares or a 23.47 % stake of the company shares to online gaming firm GungHo Online Entertainment Inc.
GungHo, which is behind the popular game Puzzles & Dragons, will reportedly acquire the shares through a tender offer this month. According to the company, these steps are a
According to the company, these steps are a “part of our SoftBank 2.0 transformation strategy.” Speaking on these divestment plans, Hiroe Kotera, a SoftBank spokeswoman said,
The purpose of the Alibaba share sale is to enhance our financial profile and the proceeds will be used for general corporate purposes. The sale of GungHo shares is part of our long-term push to become a global enterprise.
Softbank is also reportedly in talks to exit European gaming firm Supercell Oy by selling a majority of its shares to Chinese firm Tencent. If this deal happens, it could be worth $3.7 billion and the total amount raised by Softbank through asset sales would climb to $14 billion.
These deals will help Softbank reduce its mounting debts which have grown 5.6 times in the past four years following its acquisition of American telecommunication company Sprint.
The $22 billion worth acquisition of Sprint has not worked out for Softbank as the company has been on a streak of losses for last seven years. Consequently, Sprint has $10 billion of liabilities due for the next three years.
According to Softbank, the sale of Alibaba shares alone will bring down its ratio of net debt to earnings before interest, taxes, depreciation and amortization to 3.3 times, from 3.8 at the end of March.