MetroPCS shareholder P. Schoenfeld Asset Management (PSAM) has asked other shareholders to vote against the operator’s reverse merger with Deutsche Telekom subsidiary T-Mobile USA. PSAM, which holds around 8.3 million shares equating to just over 2%…
MetroPCS shareholder P. Schoenfeld Asset Management (PSAM) has asked other shareholders to vote against the operator’s reverse merger with Deutsche Telekom subsidiary T-Mobile USA.
PSAM, which holds around 8.3 million shares equating to just over 2% of the telco, has filed preliminary proxy materials with the SEC in a bid to rally support for its objections.
Explaining its position, PSAM said that the new company was “not appropriately and fairly capitalised”. It alleged the interest rate on Deutsche Telekom’s debt financing was “far above market” based upon PCS/T-Mobile’s anticipated credit rating. It also claimed that the merger’s exchange ratio was “unfair” to MetroPCS shareholders.
PSAM, whose stake is worth around US$83m based on MetroPCS’ last closing price of US$10.35, contended that the operator would be better remaining independent for now and wait for a better offer.
A date for the shareholder meeting to vote on the T-Mobile offer is yet to be set.
Deutsche Telekom’s offer was agreed with MetroPCS’s board at the beginning of last October. The deal is structured as a recapitalization in which MetroPCS will declare a 1 for 2 reverse stock split. MetroPCS shareholders will receive a US$1.5bn cash payment, equalling about US$4.09 per share prior to the reverse stock split.
MetroPCS will acquire all of T-Mobile’s capital stock by issuing 74% of MetroPCS’ common stock to Deutsche Telekom on a pro forma basis. The shareholders of MetroPCS will retain 26% ownership in the combined entity.
DT said it will roll its existing intercompany debt into new US$15bn senior unsecured notes of the combined company, provide the combined company with a US$0.5bn unsecured revolving credit facility and provide a US$5.5bn backstop commitment for certain MetroPCS third-party financing transactions.
The companies expect the deal to close before the end of Q2.
Morgan Stanley and Lazard are advising Deutsche Telekom, while MetroPCS is advised by JP Morgan, Credit Suisse and Evercore Partners.
