U.S. stocks are in the red this morning, with the S&P 500 (SNPINDEX:^GSPC) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES:^DJI) down 0.88% and 0.77%, respectively, at 10:05 a.m. EDT.

SoftBank's final offer
Internet entrepreneur Masayoshi Son and his Japanese telecom group SoftBank appear to have finally bagged their prey with an improved offer for Sprint Nextel (NYSE:S), the U.S.'s third-largest wireless carrier. Does the offer make sense for shareholders?

Softbank's new cash-and-share offer of $21.6 billion is $1.5 billion higher than its previous bid. Better yet, SoftBank lifted the cash component by $4.5 billion. Altogether, the offer values Sprint at $7.65 per share compared to $7.30 previously. Shares are currently trading at $7.33, up 0.3% so far today.

Assessing Sprint Nextel's valuation on the basis of a traditional price-to-earnings multiple isn't possible: The company has not earned an annual profit since 2006 (though it has been free-cash-flow positive throughout that period). However, according to data from S&P Capital IQ, Sprint's enterprise-value-to-EBITDA ratio is at the top of the range in a group of 11 comparable companies -- including SoftBank itself. (Enterprise value is equal to the company's market capitalization plus its net debt. EBITDA -- earnings before interest, taxes, depreciation, and amortization is a measure of cashflow.)

 

Enterprise Value to TTM EBITDA

Enterprise Value to NTM EBITDA

Sprint Nextel

8.6

6.6

SoftBank

7.6

--

Group of 11 comparable companies*, high value

9

6.6

Group of 11 comparable companies, median value

6.3

6

*Includes Sprint Nextel. Source: S&P Capital IQ.

Long-term shareholders of Sprint have had an extremely volatile ride over the past five years, with shares suffering two substantial peak-to-trough declines (40%-plus and 50%-plus) after the market's March 2009 low:

S Chart

S data by YCharts.

However, the last 12 months have been good to shareholders: The shares have rallied 146%. Investors now have the opportunity to realize those gains through SoftBank's offer, which looks fair. Sprint's second-largest shareholder, hedge fund Paulson & Co., shares that assessment, supporting SoftBank's "improved financial terms."

It's time for investors to sell and move on.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.