Speculation continues about Metrocall’s stated intention to participate further in the paging industry’s consolidation. The quintupling of Metrocall stock to more than $10 a share-along with the $75 million in potential added investments from Hicks, Muse, Tate & Furst and existing bank facilities-leaves Metrocall free to pursue several options, analysts say.
This speculation has been fueled by comments made last Monday during Metrocall’s conference call with reporters and analysts.
“We’re looking at things extremely carefully,” said Vince Kelly, Metrocall chief financial officer, when asked of Metrocall’s acquisition targets. “We have to do our work, sit back … and if an opportunity presents itself … we certainly are going to give it a good look.”
Analysts continue to guess Metrocall wants a piece of Paging Network Inc., which is in the process of merging with Arch Communications Group Inc. Kelly responded to this speculation during the call.
“There is a deal on the table between Arch and PageNet,” he said. “We’ve looked closely at the whole situation.”
He said PageNet’s inability to pay its senior notes has implications, as does the plan to enforce the Arch merger through a prepackaged bankruptcy if it doesn’t get a consensus otherwise.
Kelly made additional comments to Dow Jones last week, suggesting the prepackaged bankruptcy proceedings would render PageNet stock worthless and that buying PageNet stock now is risky.
Not surprisingly, his comments somewhat rankled PageNet officials. The company has had little to say to date on the possibility of a Metrocall intercession.
“We are committed to the Arch deal,” said PageNet’s Scott Baradell, director of corporate communications. “We think it’s a good one for both companies, and for our stakeholders.”
Chris Larsen, wireless analyst at Prudential Securities, said PageNet is at the center of rumor activity simply because it is in play with Arch. He said because the Arch/PageNet deal does not offer PageNet bondholders 100 percent of their held debt, the deal is vulnerable to a better offer from Metrocall or anybody else.
“It’s possible Metrocall is eying up PageNet,” he said. “It wouldn’t be the first time Metrocall had a run-in with an Arch deal,” referring to the belief that Metrocall tried to interfere with Arch’s acquisition of MobileMedia. “They could be calling bondholders right now.”
But Larsen said he wasn’t convinced PageNet is Metrocall’s best target.
“I think TSR (Wireless L.L.C.) is most likely,” he said. “They run a decent ship and have shown a moderate interest in going public, although they’re in no rush … TSR brings a lot of good assets, relatively speaking.”
In particular, Larsen noted TSR’s retail distribution prowess. TSR’s nationwide retail stores can be leveraged with Metrocall’s AT&T wireless store presence to command a strong retail distribution chain. He also mentioned TSR’s narrowband personal communications services licenses.
Metrocall also announced a third-quarter net loss of $41.9 million, or $1.10 per share, compared with a loss of $38.8 million, or $1.04 per share, reported a year earlier.
Revenues were $137.2 million for the quarter, compared with $141.4 million for the same period last year. The results beat analysts’ expectations of a $1.13 per share loss.
