MetroPCS shareholders file lawsuit to block the deal with T-Mobile
Once valued at $10 billion, and the subject of a failed $8 billion offer from Sprint last year, MetroPCS is now being merged into Deutsche Telekom's T-Mobile USA in a deal structured as a reverse merger. The German telecom is picking up a majority stake in the fifth largest U.S. carrier for a measly $1.5 billion. But many MetroPCS shareholders are upset at what they see is the company being stolen out from under them on the cheap.
To get the deal done, MetroPCS shares will undergo a 1 for 2 reverse split while 74% of the shares get scooped up by T-Mobile USA's parent firm. In the lawsuit, MetroPCS is described as being "drastically" undervalued in the deal which the suit says favors T-Mobile and Deutsche Telekom. Current MetroPCS shareholders, who started the legal action, will receive the aforementioned $1.5 billion in a payment valued at $4.09 a share. They will also own 26% of the publicly traded stock valued at $12.48 a share.
According to the suit, a no-solicitation clause in the deal prevents MetroPCS from talking to or providing information for a third party bidder except in an "extremely limited" situation. T-Mobile also has the ability to match any higher offer and will receive a $150 million payment if MetroPCS decides to take a higher bid from another company.
The goal of the common stockholders now is to use every legal tool that they have to try to force Deutsche Telekom to raise the price of the deal, or remove the hurdles for a higher offer from a third party. And while it seems a shame to have to put more money in the pockets of the attorneys, MertroPCS holders do have to make sure that their legal rights are not trampled on by Carly and her runaway bike.
source: OpposingViews via Phandroid
"[Metro]PCS' officers and directors will receive millions of dollars in special payments - not being made to ordinary shareholders - for currently unvested stock options, performance units and restricted shares, all of which shall, upon the merger's closing, become fully vested and exercisable."-Plaintiff's filing
The MetroPCS shareholders also object to clauses in the deal that prevent another party from making a higher bid for the carrier. Sprint had been mentioned as a potential suitor, but Japan's Softbank has acquired 70% of the nation's third largest carrier. The plaintiffs also point out that MetroPCS executives stand to make a fortune on the deal as stock options and restrictive shares immediately become vested upon the closing of the deal. Management also stands to receive 'Change of Control" payments once the deal is final. The insinuation is that the Pre-paid carrier's board and its executives are not looking out for the common stockholders in the deal, and instead is concerned only with the fortunes that they will reap.
According to the suit, a no-solicitation clause in the deal prevents MetroPCS from talking to or providing information for a third party bidder except in an "extremely limited" situation. T-Mobile also has the ability to match any higher offer and will receive a $150 million payment if MetroPCS decides to take a higher bid from another company.
"Based on market estimates, the combined company is expected to have 2012 pro forma revenues of approximately $24.8 billion and cost synergies of $6-7 billion. The deal is expected to result in accelerated financial growth with estimated five-year [compound annual growth rate] for revenues, [earnings before interest, taxes, depreciation and amortization] and free cash flow in the range of three percent to five percent, seven percent to ten percent and 15 percent to 20 percent, respectively."-Filing by Plaintiffs
The goal of the common stockholders now is to use every legal tool that they have to try to force Deutsche Telekom to raise the price of the deal, or remove the hurdles for a higher offer from a third party. And while it seems a shame to have to put more money in the pockets of the attorneys, MertroPCS holders do have to make sure that their legal rights are not trampled on by Carly and her runaway bike.
source: OpposingViews via Phandroid
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