SoftBank Group Corp stock surged to its highest price in over half a year in Tokyo on February 12, after a US 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 $100 billion (77.13 billion pounds)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 84%, 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 78%, while those of T-Mobile climbed 12%. SoftBank saw its shares open 12.5% higher in Tokyo on February 12, ending morning trade up 13.7% at 5,843 yen.
The Japanese firm reports its earnings later on February 12, with Son speaking at an earnings briefing from 0700 GMT.
Analysts on average expect SoftBank to report a 20% 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 20% year-to-date, after sources last week told Reuters that activist hedge fund Elliott Management has amassed a stake of almost $3 billion in SoftBank and is pushing for change at the firm including $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 26% stake in Chinese e-commerce major Alibaba Group Holding Ltd , Goyal said.
Son previously dipped into the stake - which is currently worth $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.