As the shareholder vote comes closer, T-Mobile deal with MetroPCS is in real danger of failing
Unfortunately for those in favor of the deal, at least two proxy solicitation firms, including influential ISS, have recommended to big share holders that they vote against the union of the fourth and fifth largest U.S. carriers. And the largest stockholder in the carrier, Paulson & Co, has announced its intentions to vote against the merger. Also voting "No" will be P. Schoenfeld Asset Management, a fund with a large holding of MetroPCS stock.
Those who own MetroPCS stock will receive $4.06 for each share. In addition, they will together have a 26% stake in the new, combined company. The stock will undergo a 1 for 2 reverse split after the deal closes, meaning that for every 100 shares that a MetroPCS owner has now, he will have 50 shares when the deal is complete. The stock price will double,which means that the value of the stock will remain the same. The reason to do such a split is to get the shares over the $5 threshold as many mutual funds will not buy a stock that trades for less than $5.
You might be wondering about T-Mobile holders. Well, T-Mobile is a private company owned by German telco giant Deutsche Telekom. They will own 74% of the combined company after the merger closes, but they are also the source of the $1.5 billion in cash that MetroPCS holders will be receiving.
All regulatory agencies have signed off on the deal and all that is left is the stockholder vote. If both companies get a strong indication that the deal is not going to go through, they can scuttle the merger or change the terms by sweetening the pot. As is usual in a takeover deal, much of MetroPCS stock is now owned by the Arbs who have no alliances except to their bank accounts. These guys will be more than happy to see a higher price offered for MetroPCS shares.