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Hey guys,

I have a quick question regarding the acquisition of a public company. This is pretty basic, but one that I never figured out (and probably should ahead of upcoming interviews):

Using Softbank's acquisition of Sprint as an example, Softbank acquired 70% of Sprint last year (still awaiting regulatory approval).

Let's assume that they're paying for shares of Sprint all in cash, that Sprint is trading at $10/share, and their acquisition is at a price of $15/share.

Given the fact that these 70% shares of Sprint that Softbank is acquiring is held by the public, how exactly can Softbank say that they're acquiring 70% of Sprint? How do they know that the people holding onto shares of Sprint will actually sell their shares for $15/share?

Similarly, how do companies who buy out an entire public firm actually buy out 100% of the firm without any holdouts?

I feel like I'm missing a key piece of the puzzle here. Any explanation would be greatly appreciated.

Comments (3)

  • tyler4040's picture

    When you hear the portion of the company they are purchasing, it is already taking into consideration the premium that will be paid. So in your example, the 70% figure is based on Softbank buying those shares of Sprint at $15 and not $10. To answer your second question the Board would vote on whether on not to sell the company and minority investors would have very little say and could not hold out if the sale was approved by the board.

  • A Fellow Linguist's picture

    Hey Tyler,

    Thanks for your response. I understand the first point, but would like some clarification on the second:

    If I, for example, was a shareholder of Sprint (let's say I owned 0.5% of all of Sprint's shares), and the Board of Directors voted to let Softbank purchase 70% of the company, I would be required to sell my shares at the 15% premium?

  • In reply to A Fellow Linguist
    tyler4040's picture

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