MetroPCS Urges Shareholders to Approve T-Mobile Merger
MetroPCS’s board urged shareholders to approve a proposed merger with T-Mobile USA, noting in a letter Monday that there’s “no assurance that MetroPCS will be able to deliver the same or better stockholder value as a stand-alone wireless company in the future.” MetroPCS said it believes merging with T-Mobile “will create the value leader in the U.S. wireless marketplace and provide significantly more value and potential equity upside to MetroPCS stockholders than could be achieved by MetroPCS on a stand-alone basis” (http://bit.ly/XmcELo).
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The merger cleared the FCC last month, but two of MetroPCS’s leading investors have said they will vote against the deal when shareholders meet April 12. Hedge fund P. Schoenfeld Asset Management, one of the investors opposed to the deal, said in a statement Monday that “it is time for PCS management to re-examine the terms of the proposed transaction and other alternatives available to the company, such as remaining as a stand-alone business.” The hedge fund noted that two proxy advisory firms have issued reports calling on MetroPCS shareholders to vote against the deal. Glass Lewis said last week that the current merger terms offered by T-Mobile owner Deutsche Telekom do not adequately reflect the value of MetroPCS’s assets within a combined carrier; the firm also said it believed MetroPCS would be more valuable as a standalone company. International Shareholder Services cited similar concerns in its report (CD March 29 p5). A third proxy firm, Egan Jones, recommended shareholders approve the merger. The current merger terms would give MetroPCS shareholders $1.5 billion in cash and 26 percent ownership of the combined carrier.
The 26 percent ownership stake MetroPCS shareholders would receive stands “at the upper end -- or above -- the implied percentage ownership and contribution analyses performed by the special committee’s independent financial advisor,” MetroPCS said. That ownership would also result in “substantial upside over a stand-alone valuation of MetroPCS,” the board said. Investors opposed to the deal have raised concerns about the amount of debt T-Mobile would contribute to the combined carrier, including a $15 billion loan from Deutsche Telekom. That level of debt is “appropriate and market-based,” MetroPCS said. If T-Mobile were to reduce the debt it contributes to the combined carrier, it would also have to reduce the ownership stake MetroPCS shareholders would receive, the board said.
Deutsche Telekom is the only bidder to have emerged successfully from “years of discussions and negotiations with various third parties,” and no other prospective buyers have emerged since the carriers announced the proposed merger in October, MetroPCS said. If shareholders vote against the merger, they should not assume “that another buyer will acquire MetroPCS,” the board said. A T-Mobile spokesman deferred to MetroPCS.