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Charter (CHTR) Climbs, SoftBank (SFTBY) Dips On Deal Talk

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As talk surrounding the possibility of a deal between SoftBank Group and Charter Communications (CHTR - Free Report) continues to heat up, shares of the two companies moved in opposite directions on Monday.

News of the deal began to circulate over the weekend after the Wall Street Journal reported that the Japanese-based internet and telecommunications powerhouse SoftBank hoped to facilitate a merger between Charter and Sprint (S - Free Report) , a SoftBank subsidiary.

The potential deal would see SoftBank create a new public company that merged Charter and Sprint under one roof, which would then be controlled by the Japanese company. However, Charter has already turned down the proposed merger.

“We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint,” Alex Dudley, a Charter spokesman, said in an emailed statement. “We have a very good MVNO relationship with Verizon and intend to launch wireless services to cable customers next year.”

Now, Masayoshi Son, the outspoken founder and CEO of SoftBank is reportedly set to make a direct bid for Charter. Bloomberg first reported that Son is ready to scrap his previous merger proposal for a new outright bid, which he is apparently ready to announce later this week.

Shares of Charter jumped 4.72% in early afternoon trading, after moving at more than double its average volume already. On the other side of the aisle, SoftBank dipped 2.99%, while Sprint fell roughly 3% in early afternoon trading.

Key Facts to Note

Charter currently claims to be the “fastest growing TV, Internet and Voice provider” in the U.S., according to its website, and the company boasts a robust market cap of $118.35 billion. But Charter’s name isn’t always front and center.

The company purchased Time Warner Cable and Bright House networks in 2016, which helped it become the second largest cable company in the U.S. behind Comcast. The $65 billion merger eventually led Charter to rebrand its new massive offering of cable, internet, and phone services, which serves more than 26 million customers, as Spectrum.
Shares of Charter have skyrocketed over the last five years and have jumped from roughly $218 per share in May 2016 to $387 a share today.

On the other hand, SoftBank, led by its outwardly ambitious CEO has seen its stock price fluctuate heavily over that same time period. The company currently sits roughly $3 below its 52-week high.

SoftBank owns a majority stake in Yahoo Japan and was one of Alibaba’s (BABA - Free Report) first big investors. The company took control of Sprint in 2012 and even tried to buy T-Mobile (TMUS - Free Report) in 2015—but regulators blocked the deal.

Despite its strong run, Charter currently has about $60 billion in debt. And a Charter deal would become the most expensive in SoftBank’s history.

“Son is going back to his bad old days of wanting to conquer the world, just as we thought he was becoming more sensible,” Amir Anvarzadeh, head of Japanese equity sales at BGC Partners Inc. in Singapore, told Bloomberg.  “It does sound as if they’re doing anything but de-leveraging. They’re re-leveraging.”

SoftBank is currently a Zacks Rank #3 (Hold) and scored an “A” for Value in our style score system. Charter is also a Zacks Rank #3 (Hold), but the company scored a “D” for both Value and Momentum in our style score system.

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