A New York law firm is investigating the US$1.19bn sale of Leap Wireless to AT&T on behalf of shareholders in what could result in a class action lawsuit. Pomerantz, Grossman, Hufford, Dahlstrom & Gross said it is looking into whether Leap’s directors…
A New York law firm is investigating the US$1.19bn sale of Leap Wireless to AT&T on behalf of shareholders in what could result in a class action lawsuit.
Pomerantz, Grossman, Hufford, Dahlstrom & Gross said it is looking into whether Leap’s directors were in breach of their fiduciary duties by failing to conduct an open sale process and maximise value for investors.
AT&T’s US$15.00 offer represented an 88% premium on Leap’s previous closing share price, but Pomerantz says the deal “is below average revenue and EBITDA multiples of comparable transactions”, citing Bloomberg.
However BTIG Research analyst Walter Piecyk called the price AT&T is offering to pay as “grossly excessive”.
Piecyk suggested that even factoring in the subscribers it gains, AT&T will effectively be paying double what Verizon Wireless paid for AWS spectrum it bought from cable operators last summer. In a blog post he also questioned to what degree the AWS frequencies AT&T has acquired are compatible with its existing licences.
Moffett Research principal Craig Moffett argued that the premium AT&T paid is large relative to Leap’s equity, it looked much more modest when Leap’s US$2.8bn debt pile was taken into account.
He added that the transaction was “a great way [for AT&T] to stick it to T-Mobile US”. The Deutsche Telekom subsidiary has been taking customers from AT&T and Moffett suggested the deal is in part a reaction to that, especially because T-Mobile has the most AWS spectrum of the all the US carriers.
Analysts have suggested a Leap/T-Mobile tie-up would have better compatibility in terms of spectrum. Moffett warned that regulators might view the deal as an obstructive move: “That the motivation for the deal can be potentially viewed as [an] attempt to block T-Mobile will … invite heightened scrutiny.”
Leap’s share price is trading above the US$15.00 mark at US$16.95, suggesting investors think there is a chance of a rival offer.
AT&T said it expects the deal to close in six to nine months.
