Glass Lewis has become the second proxy firm in the space of a week to recommend MetroPCS shareholders to vote against the Deutsche Telekom-backed takeover of the operator. T-Mobile USA agreed to a reverse-merger with the operator last October, but…
Glass Lewis has become the second proxy firm in the space of a week to recommend MetroPCS shareholders to vote against the Deutsche Telekom-backed takeover of the operator.
T-Mobile USA agreed to a reverse-merger with the operator last October, but since then there has been growing opposition amongst MetroPCS shareholders, some of which believe that the deal is not fair.
Hedge funds Paulson & Co and P. Schoenfeld Asset Management (PSAM) – which together hold 12% of the target – have said that the deal would not maximise shareholder value, that the new company’s leverage would be too high and that the terms are too much in favour of Deutsche Telekom.
In its report Glass Lewis said that it agreed with the board’s strategy to team up with a larger carrier, but was concerned that it had not conducted a sale process that would maximise value for shareholders.
It said the board should have publicly put the operator up for sale before agreeing to the T-Mobile USA deal, and that the US$150m termination fee on that transaction had discouraged any subsequent rival bids.
Glass Lewis suggested Sprint, Dish, AT&T and Leap as potential rival bidders that might have been in play if the process had been public.
The advisory firm said the agreement undervalues MetroPCS’ contribution to the combined company and that if MetroPCS remained independent, conducted a “proper competitive sale process”, or pushed for better terms then any of these options would create more shareholder value than voting in favour of the current offer.
It suggested the situation could be remedied by increasing the cash component of the offer, by giving MetroPCS shareholders a larger stake in the merged operator, by decreasing the debt Deutsche Telekom would hold in the new company, or by lowering its potential leverage by adjusting terms.
Analysts have previously suggested that it is likely that DT will improve the terms of its offer.
MetroPCS shareholders are set to vote on Deutsche Telekom’s current offer at an EGM on April 12.
