Last updated: March 17, 2006 1:53 am

Vodafone and SoftBank close to £9bn deal

Vodafone was on Thursday night close to agreeing a £9bn (US$15.6bn) sale of its Japanese mobile phone business to SoftBank, snubbing a potential rival bid from a financial group.

Cerberus, the US hedge fund had teamed up with Providence Equity Partners for an all-cash offer and lodged its interest with Vodafone’s board on Thursday.

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However, the UK-based mobile operator decided to press ahead with its more advanced negotiations with SoftBank, announced two weeks ago. The decision could prove risky for Arun Sarin, Vodafone’s chief executive, as news of private equity interest had raised investors’ expectations of an auction.

The Cerberus interest accelerated Vodafone’s talks with SoftBank, which had been expected to extend into April. One person familiar with the negotiations said Vodafone could announce a deal as early as Friday. Vodafone is expected to have to provide vendor financing, taking loan notes or preference shares, to pull off the SoftBank transaction.

Cerberus and Providence are understood to have held discussions with banks including JPMorgan and Morgan Stanley about financing the deal.

Mr Sarin has been under pressure from shareholders to sell Vodafone’s operation in Japan and concentrate on improving Vodafone’s performance in the increasingly competitive European market. Analysts expect him to use the proceeds from any sale to repay debt and return at least £5bn to shareholders.

Vodafone would not comment on Thursday, while SoftBank said it was continuing negotiations. SoftBank has discussed financing with banks including Deutsche Bank and Goldman Sachs and Mizuho is also believed to be involved. JPMorgan and Morgan Stanley declined to comment on financing talks with Cerberus.

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