| Raine Securities LLC 810 Seventh Avenue, 39th Floor New York, NY 10019 Tel: (212) 603-5500 Fax: (212) 603-5501 Tel: (310) 987-7700 LA Tel: (415) 967-5830 SF |
April 29, 2018
Sprint Corporation
6200 Sprint Parkway
Overland Park, KS 66251-6117
Attention: The Board of Directors of Sprint Corporation
Dear Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of outstanding shares of common stock, par value $0.01 per share (the “Sprint Common Stock”) as of immediately prior to the Hawk Mergers (as defined below), of Sprint Corporation (“Sprint”) of the Exchange Ratio (as defined below), taking into account the Merger (as defined below), pursuant to the Business Combination Agreement (the “Business Combination Agreement”) by and between T-Mobile US, Inc. (“T-Mobile”), Huron Merger Sub LLC, a wholly-owned subsidiary of T-Mobile (“Hawk Merger Company”), Superior Merger Sub Corp., a wholly-owned subsidiary of Hawk Merger Company (“Merger Sub”), Sprint, Starburst I, Inc., Galaxy Investment Holdings, Inc., SoftBank Group Corp. (“SoftBank”) Deutsche Telekom AG and Deutsche Telekom Holding BV.
We understand that, pursuant to the Business Combination Agreement, Starburst I, Inc. and Galaxy Investment Holdings, Inc. shall each merge with and into Hawk Merger Company, with Hawk Merger Company continuing as the surviving entity and as a wholly owned subsidiary of T-Mobile (the “Hawk Mergers”) and each issued and outstanding share of Starburst I, Inc. and Galaxy Investment Holdings, Inc., respectively, shall be cancelled and converted into the right to receive a proportionate amount of shares of common stock, par value $0.00001 per share, of T-Mobile (“T-Mobile Common Stock”) based on the product of the number of shares of Sprint Common Stock held by Starburst I, Inc. and Galaxy Investment Holdings, Inc., respectively, and the Exchange Ratio (as defined below), and immediately following the Hawk Mergers, Sprint will be merged with and into Merger Sub, with Sprint being the surviving corporation (the “Merger”), and each issued and outstanding share of Sprint Common Stock, other than shares of Sprint Common Stock held in treasury or held by Hawk Merger Company, shall be converted into the right to receive 0.10256 shares (the “Exchange Ratio”) of T-Mobile Common Stock.
In arriving at our opinion, we have, among other things:
| 1. | reviewed the draft dated April 29, 2018 of the Business Combination Agreement; |
| 2. | reviewed certain publicly available financial and other information relating to Sprint and T-Mobile, including publicly filed reports for each of Sprint and T-Mobile, publicly available research analyst reports regarding each of Sprint and T-Mobile, and reported price and trading activity for the Sprint Common Stock and the T-Mobile Common Stock; |
| 3. | reviewed certain additional financial and other information regarding the business, operations and future prospects of Sprint, which was furnished to us by Sprint, including certain financial projections (the “Sprint Projections”) prepared by the management of Sprint; |
| 4. | reviewed and discussed certain additional financial and other information regarding the business, operations and future prospects of T-Mobile, which was furnished to us by T-Mobile, including certain financial projections (the “T-Mobile Projections”) prepared by the management of T-Mobile; |
K-1
Sprint
April 29, 2018
Page 2
| 5. | reviewed and discussed certain additional financial and other information regarding the potential synergies that may result from the Merger, as jointly projected by the managements of T-Mobile and Sprint (the “Projected Synergies”); |
| 6. | conducted discussions with management of Sprint regarding (i) the business, operations and future prospects of Sprint, including their views regarding the Sprint Projections, (ii) the business, operations and future prospects of T-Mobile, including their views regarding the T-Mobile Projections, (iii) the strategic rationale for and the potential benefits of, the Merger, and (iv) the business, operations and future prospects of a combined entity, including management’s views regarding the Projected Synergies; |
| 7. | reviewed and discussed certain financial information of a proforma combined entity, including associated synergies that may result from the Merger, pursuant to projections jointly prepared by the managements of T-Mobile and Sprint (the “NewCo Projections”); |
| 8. | reviewed and analyzed certain publicly available financial data relating to selected public companies that we deemed relevant to our analysis; |
| 9. | reviewed the financial terms, to the extent publicly available, of certain other business combinations; and |
| 10. | conducted such other financial studies, analyses and investigations, and considered such other factors, as we deemed appropriate for purposes of this opinion. |
In rendering our opinion, we have relied upon and assumed, without independent verification, the accuracy and completeness of all the financial and other information that was available to us from public sources, that was provided to us by Sprint or T-Mobile or any of their respective representatives, or that was otherwise reviewed by us, and have been advised by management of Sprint that it is not aware of any information that might be material to our opinion that has not been made available to us. With respect to the Sprint Projections, we have been advised by management of Sprint that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Sprint as to the future operating and financial performance of Sprint. With respect to the T-Mobile Projections, we have assumed, at the direction of Sprint’s management, that the T-Mobile Projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of T-Mobile as to the future operating and financial performance of T-Mobile. With respect to both the Projected Synergies and the NewCo Projections, we have been advised by Sprint’s management that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Sprint and have assumed, at the direction of Sprint’s management, that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of T-Mobile as to the future operating and financial performance of the potential combined entity. We have further assumed, at the direction of Sprint’s Management and with your consent, that the financial results in each of the Sprint Projections, T-Mobile Projections, Projected Synergies and NewCo Projections and other financial and operating data utilized in our analyses will be realized at the times and in the amounts projected. We assume no responsibility for and express no view as to any such projections or forecasts, or as to the assumptions on which they are based.
We have not assumed any responsibility for making an independent evaluation or appraisal of any assets or liabilities of Sprint or T-Mobile, contingent or otherwise, and have not been provided with any such evaluation or appraisal, nor have we evaluated the solvency, viability or fair value of Sprint or T-Mobile or any other person or any assets, under any state or federal laws relating to bankruptcy, insolvency or similar matters. Without limiting the generality of the foregoing, we have undertaken no independent analysis of any outstanding, pending or
K-2
Sprint
April 29, 2018
Page 3
threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities to which Sprint or T-Mobile or any of their respective affiliates is a party or may be subject, and, at the direction of Sprint, our opinion does not consider the possible assertion of claims, outcomes or damages arising out of any such matters.
We have assumed that the Merger and the Hawk Mergers will be consummated in a timely manner and in accordance with the terms of the Business Combination Agreement, without any limitations, restrictions, conditions, amendments, waivers or modifications, regulatory or otherwise, and without any adjustment to the Exchange Ratio, that collectively would have an adverse effect on Sprint or T-Mobile, or the benefits contemplated by the Merger or the Hawk Mergers, in any way material to our analysis. We have assumed that the representations and warranties of Sprint and T-Mobile as set forth in the Business Combination Agreement are true and correct in all respects material to our analysis. We have assumed that the Merger and the Hawk Mergers will be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. We also have assumed that the final executed Business Combination Agreement will not differ in any material respect from the draft referred to above.
Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent circumstances, developments or events may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion.
Our opinion does not address the relative merits of any portion of the Merger as compared to any other business strategies or alternative transactions that may be available to Sprint, nor does it address the underlying business decision of the Board of Directors of Sprint (the “Board”) or any other person to proceed with the Merger or any other action. We do not express any view or opinion with respect to any aspect of the Business Combination Agreement or the Merger, other than the fairness to the holders of Sprint Common Stock immediately prior to the Hawk Mergers of the Exchange Ratio, taking into account the Merger, to the extent expressly specified herein, including that we do not express any view or opinion with respect to the Hawk Mergers or any legal, tax, regulatory or accounting matters relating to the Merger, as to which we understand that Sprint has obtained such advice as it deemed necessary from qualified professionals.
Our opinion is limited to whether the Exchange Ratio, taking into account the Merger, is fair to the holders of Sprint Common Stock immediately prior to the Hawk Mergers, solely in their capacity as stockholders, from a financial point of view, and does not address any other terms or aspects of the Merger including, without limitation, the Hawk Mergers or the form or structure of the Merger or any terms or aspects of any voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Merger, the Hawk Mergers or otherwise. We are not expressing any opinion as to the prices at which shares of T-Mobile Common Stock will trade at any time or as to the impact of the Transaction on the solvency or viability of Sprint or T-Mobile or the ability of Sprint or T-Mobile to pay their respective obligations when they come due.
We also express no view or opinion as to the fairness of the amount or nature of the compensation, if any, to be received by any party’s officers, directors or employees, or any class of such persons, as a result of, or in connection with, the Merger or the Hawk Mergers, relative to amounts to be paid or issued to any party’s stockholders or otherwise, or to the relative ownership of T-Mobile by the holders of T-Mobile Common Stock following the Merger and the Hawk Mergers. Our opinion does not constitute a recommendation to the Board, the holders of Sprint Common Stock, the holders of T-Mobile Common Stock or to any other person as to how to vote or act with respect to the Merger or the Hawk Mergers or any other matter.
K-3
Sprint
April 29, 2018
Page 4
Raine Securities LLC (“Raine”), as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions and valuations for corporate and other purposes. Raine has acted as a financial advisor to Sprint in connection with the Merger and will receive a fee for such services, a portion of which is payable upon the rendering of this opinion and a significant portion of which is payable upon the consummation of the Merger. Sprint also has agreed to reimburse us for certain expenses and to indemnify us against certain liabilities arising from our engagement. In the past two years prior to the date hereof, we have provided financial advisory and investment banking services to SoftBank, the majority equityholder of Sprint, which are unrelated to the Merger, for which we have received customary compensation. Further, we were previously engaged by SoftBank to act as SoftBank’s financial advisor in connection with its consideration of a potential transaction between Sprint and T-Mobile, including a potential merger, for which we received customary compensation. Entities affiliated with SoftBank beneficially own a minority interest in Raine, and affiliates of SoftBank and Raine are investors in investment funds managed by Raine and SoftBank, respectively. We may, in the future, provide other investment banking, financial advisory or other services to Sprint, T-Mobile, SoftBank, Deutsche Telekom AG or their respective affiliates, for which we would expect to receive compensation.
Our opinion has been approved for issuance by the fairness opinion and valuation review committee of Raine. This opinion letter is provided for the confidential use of Sprint only in its evaluation of the Merger and is not to be used for any other purpose or disclosed or otherwise referred to in any manner, without our prior written consent, except as provided in the engagement letter, dated April 25, 2018, by and between Sprint and Raine.
Based upon and subject to the foregoing and such other factors as we deem relevant, we are of the opinion that, as of the date hereof and taking into account the Merger, the Exchange Ratio pursuant to the Business Combination Agreement is fair, from a financial point of view, to the holders of Sprint Common Stock as of immediately prior to the Hawk Mergers.
K-4
Sprint
April 29, 2018
Page 5
| Very truly yours, |
| RAINE SECURITIES LLC |
| /s/ Raine Securities LLC |
[Signature Page to Opinion Letter]
K-5
