MetroPCS proposes $5.1B merger with Leap

MetroPCS Communications Inc. has proposed a merger with its flat-rate rival Leap Wireless International Inc.
Metro said it sent Leap a letter detailing its offer, which involves a “stock-for-stock, tax-free merger that will create a fifth national wireless carrier.” Each outstanding share of Leap’s stock would be exchanged for 2.75 shares of MetroPCS’ common stock, which Metro said implies a value of $77.89 per share for Leap-and an estimated value of about $5.1 billion for the deal. Metro would also take on about $2 billion of Leap’s debt. The merged company would be 65.4% owned by MetroPCS shareholders, and 34.6% owned by Leap shareholders.
The news sent Leap’s stock soaring more than 14% in early trading, and Metro’s stock was up more than 4%. Leap’s stock was trading at around $72 before the announcement.
“We believe that the time is right to bring our companies together,” said Roger Linquist, MetroPCS’ chairman and CEO, in Metro’s letter to Leap.
Metro said that, based on its preliminary analysis, the combined company “would achieve meaningful operating cost savings through a combination of market-level operating efficiencies and corporate overhead reductions. MetroPCS’ and Leap’s existing market operations are complementary and MetroPCS believes that the combined company, as a result of the expanded service area, would likely benefit from incremental improvements in customer penetration and retention.”
Metro estimated the value of the merger synergies at about $2.5 billion.
The company also said that it believes Leap’s stock “has traded in part in anticipation of a merger between the two companies” since MetroPCS went public last spring.
Leap representatives were not immediately available for comment, but the company has not released an official response to Metro’s offer.
“We believe that the combination of MetroPCS and Leap is extremely compelling and will create significant value for the stakeholders of both companies,” said Linquist. “The combined company will create a new national wireless carrier with licenses covering nearly all of the top 200 markets in the United States. . We are excited about the prospects this opportunity creates and plan to work diligently to enter into a transaction quickly.”