The Reverse Merger Between T-Mobile And MetroPCS
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.