A proposed merger between wireless service provider MetroPCS Communications Inc.(NYSE:PCS) and T-Mobile USA, a division of Deutsche Telekom AG (DTE.DE), is being opposed by the Paulson & Co investment management firm. As reported by Carew and Damouni at Reuters, Paulson will vote against the current form of the merger on March 28, because the merged entity would have “too much debt at too high an interest rate to be competitive.” The proposed combined company would hold $23.2 billion in debt, according to Bloomberg.
With a 9.9 percent share of stock, Paulson is the largest shareholder of MetroPCS Communications Inc., but it is not alone in its opposition to this proposed merger. P. Schoenfeld Asset Management LP, which currently holds 2.3 percent of MetroPCS stock, is also strongly opposed to the deal. Based on its analysis of the current merger terms, Paulson believes that MetroPCS would have a higher value as an independent company that could continue to pursue an independent-operations strategy.
MetroPCS initially agreed to the merger with T-Mobile USA in October of last year, but MetroPCS shareholders are not due to vote on it until March 28. Under the current terms of the reverse merger deal, Deutsche Telekom, the parent company of T-Mobile USA, would have a 74 percent stake in the merged company, and MetroPCS shareholders would get $1.5 billion in cash.
Paulson’s opposition may derail this proposed merger. MetroPCS stocks have fallen since the merger was announced on Oct. 3, when the stock closed at $12.24. MetroPCS stock closed at $9.80 on Thursday and Deutsche Telekom closed down 1.3 percent on Friday at 8.12 euros. Below is a comparison of MetroPCS stock approximately two hours before closing on Friday with Deutsche Telekom stock.
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