MetroPCS Defends its Plans to Merge with T-Mobile

Cell Tower detailShares of MetroPCS Communications Inc. (NYSE: PCS) jumped to a 52-week high of $14.51 the day last October when the company announced its proposed merger with T-Mobile USA, which is owned by Deutsche Telekom AG. The deal was not a particularly good one for MetroPCS shareholders: $1.5 billion in cash, T-Mobile's assumption of $15 billion in MetroPCS debt, and a 26% stake in the surviving company, which would have been called T-Mobile USA.

One asset management firm opposed the merger practically at once. Paulson & Co. joined in opposing the deal earlier this month. Together, the two opponents hold more than 10% of MetroPCS's stock.

In today's letter to shareholders, MetroPCS urges them to vote in favor of the deal by the April 12th special stockholders' meeting. Their argument:

The immediate cash payment you will receive and the significant ownership interest you will hold in the combined company represent a substantial premium to MetroPCS' stand-alone value, and your meaningful ownership in the combined company will allow you to participate in the potential synergies and value created by this combination.

Current shareholders will receive about $4.06 per share they now hold before MetroPCS shares go through a 1-for-2 reverse stock split at the time the deal closes. In addition, the board's letter goes on, MetroPCS shareholders get a 26% stake in the combined company and the opportunity "to participate in the expected significant equity upside of the combined company."

Opponents point out that part of the deal saddles T-Mobile USA with a total debt of $23.2 billion, of which $15 billion is owed to Deutsche Telekom. In a marketplace featuring well-capitalized competitors like Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T), T-Mobile would be playing with a huge anchor around its neck.

Maybe MetroPCS is worth more than T-Mobile is paying, but that assumes that the firm could find another buyer. At this point, that could be virtually impossible. If MetroPCS turns down the T-Mobile offer, it could sink on its own. Then Paulson and other opponents of the deal on the table would really be unhappy.

Shares of MetroPCS are down 2% at around noon today, at $10.29 in a 52-week range of $5.53 to $14.51.


Filed under: 24/7 Wall St. Wire, Mergers and Buy Outs, Shareholder Issues, Telecom & Wireless Tagged: PCS, T, VZ
Read Full Story

Markets

DJIA 21,899.89 196.14 0.90%
NASDAQ 6,297.48 84.35 1.36%
S&P 500 2,452.51 24.14 0.99%
NIKKEI 225 19,495.39 111.55 0.58%
HANG SENG 27,401.67 246.99 0.91%
DAX 12,229.34 163.35 1.35%
USD (per EUR) 1.18 0.00 -0.03%
USD (per CHF) 0.97 0.00 0.03%
JPY (per USD) 109.67 -0.06 -0.06%
GBP (per USD) 1.28 0.00 -0.07%

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.