Hedge fund claims merger terms unfair to MetroPCS shareholders.
Hedge fund P. Schoenfeld Asset Management LP is opposing the planned acquisition of MetroPCS Communications Inc. by Deutsche Telekom AG’s T-Mobile USA.
The two companies announced the deal–combining the fourth- and fifth-largest U.S. wireless carriers–in October. It is structured as a reverse merger, meaning that T-Mobile will merge into the already public structure of MetroPCS, with Deutsche Telekom getting 76% of the company. MetroPCS shareholders will get the rest, along with $1.5 billion in cash, or about $4.09 a share.
In a letter sent to the boards of both Deutsche Telekom and MetroPCS, the firm criticized the structure of the deal as being unfair to MetroPCS shareholders and said it would vote its 7.5 million shares against the deal unless the terms are changed. In a statement, MetroPCS said its board believes the deal is in the “best interest” of shareholders and continues to back the combination.
MetroPCS said its board and special committee, along with advisers, will review the points of the letter from P. Schoenfeld.
In the letter, the fund objects to the interest rate on financing provided by Deutsche Telekom, asserts that the new company will be undercapitalized and said the deal gives MetroPCS shareholders an unfair exchange ratio.
“We are presently of the view that it would be better for PCS to remain a stand-alone company while examining opportunities to consummate alternative transactions, than to accept the package of cash and securities being offered to PCS stockholders,” the letter states.