Feb 7 An investment adviser to shareholders
holding about 7.5 million shares of MetroPCS Communications Inc
said it intends to vote against the company's proposed
merger with T-Mobile USA due to the deal valuation and debt
levels that come with it.
P. Schoenfeld Asset Management LP (PSAM), whose holdings
represented about 2 percent of MetroPCS shares on Oct. 19, said
it sent a letter to the boards of MetroPCS and T-Mobile USA's
parent Deutsche Telekom AG, on Jan. 30 complaining
about the deal.
MetroPCS responded by saying that it still recommends the
T-Mobile USA deal but that it would "carefully review and
consider" the perspective of P. Schoenfeld Asset Management.
The investment firm said the deal did not offer a high
enough valuation for MetroPCS shareholders and would load down
the company with debt levels it believes are "unsustainable" for
the size of the company and its credit rating.
As a result, Peter Schoenfeld, chief executive of the
investment firm said, "it would be better for PCS to remain a
stand-alone company" and look at opportunities for alternative
MetroPCS agreed to merge with T-Mobile USA in October, in a
reverse merger deal that would leave Deutsche Telekom with a 74
percent stake in the combined company. As part of the deal
MetroPCS will declare a 1-for-2 reverse stock split and pay $1.5
billion in cash to its shareholders.
Schoenfeld suggested in the letter that MetroPCS
shareholders should get 37 percent of the combined company up
from the current agreed ratio of 26 percent.
He suggested that the current deal would only make sense if
the debt level on T-Mobile USA, and by extension the combined
company, was reduced by $3.5 billion to $4 billion through
elimination of intercompany debt.
Under the current terms the combined company would have
$23.3 billion in total debt and leases, according to Schoenfeld.
The executive said the current deal offers no premium for
MetroPCS stock and complained about the current share price.
"Based on the trading level of PCS stock, it appears that
other investors share our opinion," Schoenfeld said adding that
this was substantially lower than share prices reached in 2011.
But MetroPCS said the deal is in the best interests of
shareholders and noted that it was "the result of a thorough
process that began over two years ago and included the board and
a special committee of the board considering a number of
potential transactions with different strategic partners."
The stock closed at $11.52 on Oct. 1 the day before it
emerged that MetroPCS was in talks with T-Mobile USA. But after
the deal was announced the shares then fell. The stock was up 2
cents or 0.2 percent at $9.72 on Thursday afternoon on the New
York Stock Exchange.