After a long period since the announcement of Deutsche Telekom’s (or known as DT, which is a parent company for T-Mobile based in Germany) acquisition of MetroPCS, and a lawsuit filed by shareholders soon after, the merger is continuing forward in a positive direction. This decision has been announced via the MetroPCS press release that was issued April 15th, which explains the approval by the board has unanimously voted for the go-ahead.
“We are pleased to offer even more value to MetroPCS stockholders through the amendment of certain terms of our proposed combination with T-Mobile,” said Roger D. Linquist, Chairman and Chief Executive Officer of MetroPCS. “We look forward to achieving the significant benefits inherent in the proposed combination on behalf of our stockholders, employees, customers and partners. We share DT’s commitment to the successful completion of the combination and look forward to creating the value leader in the U.S. wireless marketplace.”
The MetroPCS board of directors believes that the amendment has made significant improvements for the value of the proposal for the stockholders, and that the merger is in the best interest of everyone who owns stock in MetroPCS. The board is also recommending that “MetroPCS stockholders vote their shares “FOR” all proposals relating to the proposed combination with T-Mobile.” Upon the announcement of the possible acquisition back in late 2012, stockholders were concerned that the offering of $1.5 billion USD was undervalued, and filed a lawsuit in efforts to protect their investment. Which makes sense in regards to the fact that MetroPCS’ worth was at one point valued at $10 billion USD and has been growing since, but in a response to their concerns, an amendment was reached as stated in the press release:
“Under the revised agreement, MetroPCS stockholders will continue to receive an immediate $1.5 billion aggregate cash payment, or approximately $4.06 per share (prior to the reverse stock split that will occur in connection with the closing of the proposed combination), as well as an approximate 26% ownership stake in the combined company that allows all MetroPCS stockholders to participate in the expected significant equity upside of the combined company.”
Even though the vote was passed by a unanimous MetroPCS board, the FCC, the Department of Justice and the Committee on Foreign Investment, they still haven’t received the final approval from their stockholders, of whom are due to meet on the 24th of April. The press release also states that the principal amount of debt issued to DT by T-Mobile has been lowered to $11.2 billion USD (a reduction of $3.8 billion USD), which would in return lower the amount of the debt of the combined company, and create an addition to the financial flexibility and increase the equity value. DT also mentioned that they will reduce the interest rate on the T-Mobile debt issued to DT by a combination agreement by 50 basis points.
“This lower rate, which takes into account the new capital structure of the combined company, the improved capital markets environment in recent months and the interest rate level of MetroPCS’ $3.5 billion of bonds priced in March 2013, will reduce the combined company’s interest burden and increase free cash flow. If the DT Notes were priced on Friday, April 12, 2013, the interest rate would have been approximately 6.3%.”
So all that’s left for the merger to continue forward without strife rests on April 24th, where stockholders will meet to discuss the new proposed amendments. If the proposal is not approved, however, DT offers no method of assurance that MetroPCS will be able to hold the “same or better” value as a wireless company in the future. This is what appears to be a final offer from Deutsche Telekom.
If you are either a T-Mobile or a MetroPCS customer, or better yet, a stockholder, what do you feel about the merger?