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The Reverse Merger Between T-Mobile And MetroPCS

Padma Kadiyala, Matthew Bergman
November 1, 2015
North America
Strategy & General Management
11 pages
merger, corporate spread, equity markets, cost savings, technologies
Student Price: 
$4.00 (€3.82)
Average rating: 

Deutsche Telekom, a German listed company had proposed to merge its wholly-owned subsidiary T-Mobile USA with MetroPCS, a U.S. listed wireless services provider. The merger was to be structured as a reverse merger with PCS acquiring the assets of T-Mobile and the combined entity being listed on a U.S. stock exchange. Stockholders of MetroPCS would receive $4.09 a share in cash and a 26% equity stake in the combined company under the terms of the merger. Two shareholders of MetroPCS, Paulson & Co., and Schoenfeld Asset Management, who owned a combined 11.7% of PCS opposed the terms of the merger. They demanded a higher premium of $9.07 a share. The Sprint-Nextel merger that was completed only three years earlier offered a sobering perspective on the difficulties of merging different wireless technologies. Yet, there was a possibility that the premium offered did not fully reflect the benefit to Deutsche Telekom of a U.S. cross-listing offered by the merger with the U.S. listed MetroPCS. The decision case requires a determination of whether Paulson’s and Schoenfeld’s demand for a higher premium is justified.

Learning Outcomes: 
  1. Evaluate the soundness of quantitative analyses and predictions concerning the costs of integration and operational synergies.
  2. Demonstrate a comprehension of strategic, legal, and financial issues that affect the cost of capital for foreign firms listing equity on a U.S. Stock Exchange. 
  3. Synthesize and apply knowledge of valuation models to recommend a financial premium for a cross-border, reverse merger.