TOKYO: SoftBank Group Corp stock surged to its highest price in over half a year in Tokyo on Wednesday, after a U.S. federal judge rejected an antitrust challenge to the proposed takeover of subsidiary Sprint Corp by T-Mobile US Inc .
The ruling brings the Japanese technology conglomerate a significant step closer to slashing its exposure to a troubled asset at a time when other major bets face investor scepticism, and as it struggles to find backing for a successor to its US$100 billion Vision Fund.
"This is obviously great news for Sprint... It is better news for SoftBank," analyst Kirk Boodry at Redex Holdings wrote in a note on the Smartkarma platform.
A deal would remove the risk of SoftBank having to inject further funds into Sprint, though T-Mobile may push for better terms given Sprint's relative weakness, Boodry wrote.
Sprint is one of SoftBank founder Masayoshi Son's biggest overseas investments with Japanese ownership reaching 84per cent, but the U.S. wireless carrier has struggled to compete with larger rivals, weighing down the group.
It has long been linked with a merger with rival T-Mobile - leaving SoftBank with a minority stake - and on Tuesday, a federal judge rejected a claim by a group of states that such a tie-up would violate antitrust laws or raise prices.
The ruling sent Sprint shares soaring 78per cent, while those of T-Mobile climbed 12per cent. SoftBank saw its shares open 12.5per cent higher in Tokyo on Wednesday, ending morning trade up 13.7per cent at 5,843 yen.
The Japanese firm reports its earnings later on Wednesday, with Son speaking at an earnings briefing from 0700 GMT.
Analysts on average expect SoftBank to report a 20per cent on-year fall in operating profit for the October-December quarter, weighed down by the performance of some of its Vision Fund's tech bets.
The ruling is the latest news to boost SoftBank stock, which has risen 20per cent year-to-date, after sources last week told Reuters that activist hedge fund Elliott Management has amassed a stake of almost US$3 billion in SoftBank and is pushing for change at the firm including US$20 billion in stock buybacks.
Under pressure to boost shareholder value, SoftBank is likely to launch a share buyback this month, Jefferies analyst Atul Goyal wrote in a note. The purchases should be funded by a partial sale of SoftBank's 26per cent stake in Chinese e-commerce major Alibaba Group Holding Ltd , Goyal said.
Son previously dipped into the stake - which is currently worth US$150 billion - selling Alibaba shares ahead of the 2016 acquisition of British chip designer Arm.
SoftBank won big with Alibaba but has fared less well with its massive bets on U.S. office-sharing company WeWork and ride-hailing firm Uber Technologies Inc , and is struggling to raise outside capital for a second Vision Fund.
WeWork Chairman Marcelo Claure has pulled forward the start-up's target of becoming free cash flow positive by a year to 2022 in a boost to SoftBank's bid to win back investor trust.
(Reporting by Sam Nussey; Editing by Tom Hogue and Christopher Cushing)