John Paulson Opposes Metro PCS Merger With T-Mobile

//John Paulson Opposes Metro PCS Merger With T-Mobile

John Paulson Opposes Metro PCS Merger With T-Mobile

Hedge Fund Paulson & Co, the largest shareholder in Metro PCS  announced they would oppose the planned merger with T-Mobile

John-Paulson-1Hedge fund Paulson & Company, the largest shareholder in MetroPCS Communications, announced on Thursday that it would oppose a planned merger with T-Mobile, saying the deal would saddle the new company with too much debt. “We believe MetroPCS is worth more as a stand-alone company,” the firm, founded by the billionaire hedge fund manager John Paulson, said in a statement. The hedge fund has a 9.9 percent stake in MetroPCS.

Last October, the two companies announced a complex transaction, under which MetroPCS would conduct a 1-for-2 reverse stock split and pay out $1.5 billion in cash to its existing shareholders. The new company would then issue new stock worth about 74 percent to T-Mobile’s parent, Deutsche Telekom, leaving existing MetroPCS investors with a 26 percent stake.

P. Schoenfeld Asset Management, another large shareholder with a 1.6 percent stake in MetroPCS, announced earlier this month that it was leading a proxy battle opposing the merger. The deal has not been viewed favorably by the markets, and MetroPCS’s stock is down about 32 percent since before the deal was announced.

In a letter to the MetroPCS and Deutsche Telekom boards on Thursday, Mr. Paulson outlined several issues he had with the merger, including that T-Mobile’s performance has been “poor.” He did conclude in his letter, however, that he would support a revamped deal that reduces the new company’s debt by $6.6 billion and lower its interest rate to 4.2 percent. “Indeed, Paulson believes this lower debt and lower interest rate will result in a significantly improved multiple for MetroPCS/T-Mobile, increasing the economic return not only to MetroPCS shareholders, but also to 74% owner Deutsche Telekom,” he wrote.

The company says it plans to continue to pursue the merger. “The MetroPCS board of directors believes that the proposed combination with T-Mobile is in the best interests of MetroPCS and all MetroPCS stockholders and continues to recommend that MetroPCS stockholders vote in favor of the proposed combination,” a spokeswoman said in a statement.

Deutsche Telekom also reiterated that it remained committed to the merger. “This combination will substantially benefit the shareholders and customers of both companies by creating a new company that will be the leading wireless value carrier with expanded scale, spectrum and financial resources to compete across the entire U.S. market,” the company said in a statement.

Read More: Dealbook

Paulson & Company, the largest shareholder in MetroPCS Communications, announced on Thursday that it would oppose a planned merger with T-Mobile, saying the deal would saddle the new company with too much debt.

“We believe MetroPCS is worth more as a stand-alone company,” the firm, founded by the billionaire hedge fund manager John Paulson, said in a statement. The firm has a 9.9 percent stake in MetroPCS.

Last October, the two companies announced a complex transaction, under which MetroPCS would conduct a 1-for-2 reverse stock split and pay out $1.5 billion in cash to its existing shareholders. The new company would then issue new stock worth about 74 percent to T-Mobile’s parent, Deutsche Telekom, leaving existing MetroPCS investors with a 26 percent stake.

Paulson letter to MetroPCS and Deutsche Telekom boards (PDF)
P. Schoenfeld Asset Management, another large shareholder with a 1.6 percent stake in MetroPCS, announced earlier this month that it was leading a proxy battle opposing the merger.

The deal has not been viewed favorably by the markets, and MetroPCS’s stock is down about 32 percent since before the deal was announced.

In a letter to the MetroPCS and Deutsche Telekom boards on Thursday, Mr. Paulson outlined several issues he had with the merger, including that T-Mobile’s performance has been “poor.”

He did conclude in his letter, however, that he would support a revamped deal that reduces the new company’s debt by $6.6 billion and lower its interest rate to 4.2 percent.

“Indeed, Paulson believes this lower debt and lower interest rate will result in a significantly improved multiple for MetroPCS/T-Mobile, increasing the economic return not only to MetroPCS shareholders, but also to 74% owner Deutsche Telekom,” he wrote.

The company says it plans to continue to pursue the merger.

“The MetroPCS board of directors believes that the proposed combination with T-Mobile is in the best interests of MetroPCS and all MetroPCS stockholders and continues to recommend that MetroPCS stockholders vote in favor of the proposed combination,” a spokeswoman said in a statement.

Deutsche Telekom also reiterated that it remained committed to the merger.

“This combination will substantially benefit the shareholders and customers of both companies by creating a new company that will be the leading wireless value carrier with expanded scale, spectrum and financial resources to compete across the entire U.S. market,” the company said in a statement.

2013-02-28T23:16:56+00:00

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