Leap Wireless board rejects MetroPCS bid

NEW YORK (Reuters) - Leap Wireless International Inc. (LEAP.O) said on Sunday its board of directors had unanimously rejected an unsolicited bid from larger rival MetroPCS Communications Inc. (PCS.N), which at Friday's closing price values the company at around $4.7 billion.

After a review of the all-stock bid, Leap said in a statement the deal was not in the best interests of the company and its shareholders.

MetroPCS had bid 2.75 of its shares for each Leap share, or $69.03 per share based on Friday's closing price, according to Leap. The bid originally valued Leap at around $5.3 billion but at Friday's price it valued the company at $4.7 billion.

In a letter to MetroPCS Chairman and Chief Executive Roger Linquist included in the statement, Leap said the bid was too low because it did not reflect the company's strong growth prospects and said Leap was better positioned than MetroPCS within the industry.

"Your proposal fails to take into account Leap's robust growth prospects," Leap President and Chief Executive S. Douglas Hutcheson said in the letter.

In a statement issued on Sunday, MetroPCS said: "We are disappointed, unimpressed and studying our options."

MetroPCS added, in a later statement, that its offer was fair, and charged that Leap was ignoring the "will of its shareholder base" in rejecting the bid.

It said it will "proceed as a disciplined buyer and will review its options".

The company also said that it had held talks with Leap's chairman within the past two months to discuss merger prospects, but said those "did not lead to further substantive discussions given Leap's highly unrealistic valuation expectations".

Leap's shares had slipped about 11 percent since September 4, when the bid was announced, to Friday's close at $74.37 per share.

Analysts had said the offer was valued at 8.5 times Leap's estimated earnings before interest, tax, depreciation and amortization -- lagging behind the nine times EBITDA multiple of other recent deals.

MetroPCS' widely anticipated bid to buy Leap was seen as a move to fend off competition from larger U.S. mobile service providers, which are encroaching on MetroPCS and Leap's strategy of offering customers unlimited calls for a flat rate.

A combination of the two wireless companies would have created a provider with a presence in nearly all 200 U.S. markets, but its cumulative 6.2 million subscribers would still be far fewer than that those of the top U.S. mobile players.

Since MetroPCS launched its bid, Leap board member James Dondero and its Chief Financial Officer Amin Khalifa have resigned.

Leap was advised by Goldman, Sachs & Co (GS.N) and Jeffrey Williams & Co LLC.

MetroPCS also said in its statement that it would launch its service in Los Angeles on Wednesday and was on track to launch in New York, Philadelphia and Boston in late 2008 or early 2009. The Dallas-based company said it owns or has access to licenses in 14 of the top 25 largest metropolitan areas in the U.S.

(Additional reporting by Megan Davies in New York)