DealBook: Deutsche Telekom Sweetens T-Mobile Bid for MetroPCS

Mary Altaffer/Associated PressA MetroPCS store in Manhattan.

6:07 p.m. | Updated

Deutsche Telekom sweetened a bid by its T-Mobile USA unit for MetroPCS on Wednesday, after running into fierce resistance from shareholders of the target company.

The German telecommunications firm offered to cut the amount of debt that the combined company will bear by about $3.8 billion, and to reduce the interest rate by half a percentage point. It also agreed to extend a lockup period in which the company cannot sell shares in the merged cellphone service provider to 18 months from 6 months.

The move will essentially improve the overall value of the merged entity’s equity. Deutsche Telekom estimates that the lower debt and interest rate will add almost $3 a share in additional value for MetroPCS shareholders.

Under the present terms of the offer, MetroPCS shareholders would be paid about $4.09 a share and receive a 26 percent stake in the combined company.

Deutsche Telekom said that its latest proposal was “best and final.” A vote on the deal, which had been set for Friday, has been rescheduled to April 24.

The move is a win for investors like the hedge funds Paulson Company and P. Schoenfeld Asset Management, who have called for improvements to the original offer. Shares in MetroPCS risen steadily this year, as shareholders expected an improved offer to come, and people involved in the merger have said that the current offer is likely to fail if put to a vote.

Paulson Company and P. Schoenfeld have argued that the T-Mobile bid as it stands would add too much debt and at too high a price. They have called on Deutsche Telekom to reduce the amount of leverage on the combined American telecom.

Proxy advisory firms like Institutional Shareholder Services have largely sided with the hedge funds, putting additional pressure on Deutsche Telekom to consider raising its offer.

P. Schoenfeld said in a statement that it was pleased by the new offer, though it is currently reviewing its terms.

Article source: http://dealbook.nytimes.com/2013/04/10/deutsche-telekom-said-ready-to-sweeten-t-mobile-bid-for-metropcs/?partner=rss&emc=rss