MetroPCS Shareholders File Suit To Block Deutsche Telekom Merger

According to a brand new lawsuit filed in Dallas, Texas, the merger between T-Mobile USA and MetroPCS is “cheating shareholders” through a “drastically undervalued” merger. Under the agreed upon terms of the deal, MetroPCS declares a 1-for-2 reverse stock split and makes a $1.5 billion cash payment to its shareholders, or $4.09 a share. The company will then issue 74 percent of the remaining common stock to Deutsche Telekom and the plaintiff shareholders will own the remaining 26 percent of the newly combined company, valuing those shares at $12.48 per share.

“The process leading to the proposed acquisition was tainted by conflicts, tilted towards T-Mobile and driven entirely by the board and company management, who together control 15.4 percent of PCS’ outstanding stock and seek liquidity for their illiquid holdings,” the complaints claims.

“[Metro]PCS’ officers and directors will receive millions of dollars in special payments – not being made to ordinary shareholders – for currently unvested stock options, performance units and restricted shares, all of which shall, upon the merger’s closing, become fully vested and exercisable.”

The lawsuit plaintiffs argue that senior management will get millions of dollars in change-of-control payments that “serve their own financial interests.” The shareholders argue that the company, which traded as high as $18.69 per share in May 2011 was recently pegged by a stock analyst as set to reach $18.00 per share.

“Based on market estimates, the combined company is expected to have 2012 pro forma revenues of approximately $24.8 billion and cost synergies of $6-7 billion,” the complaint states. “The deal is expected to result in accelerated financial growth with estimated five-year [compound annual growth rate] for revenues, [earnings before interest, taxes, depreciation and amortization] and free cash flow in the range of three percent to five percent, seven percent to ten percent and 15 percent to 20 percent, respectively.”

The lawsuit plaintiffs allege that the deal was structured to make sure the sale of the company would go to one specific buyer, Deutsche Telekom, by agreeing to provisions that discouraged competing bids. MetroPCS was barred from discussing or providing any sort of confidential information to other bidders except under “extremely limited circumstances.”

The plaintiffs seek injunctive and declaratory relief for derivative and class claims of breach of fiduciary duty, abuse of control, gross mismanagement, unjust enrichment and corporate waste.

No hearing date has been set.

Opposing Views

Tags: , , ,

  • Whiskers

    WOW , this is going to get good.
    Get the popcorn out everyone , lol.

  • UMA_Fan

    Could DT quickly settle this lawsuit by giving up more of Tmobiles equity?

    • sb

      Depends on the intention of the actually plaintiff. I suspect Spring has their invisible hand involved on this lawsuit. Any large corporate merger, people come out rich. So, even if DT splashes the pot, the goal might just be to delay or kill the deal. Either way the lawyers get rich.

    • umad

      It would be foolish for DT if they do like that. It would be a huge loss for DT. Pretty unacceptable. Maybe, they will remove 1-for-2 reverse stock split. Who knows.

      • philyew

        DT are already prepared with a counter-bid in the event that another buyer, such as Sprint, steps up. That indicates that they believe there is still surplus value in the deal.
        Frankly, it doesn’t seem too smart for them to have announced that they are prepared to do this. While it might have warned off Sprint (which is now probably irrelevant, since they will be consumed in the Softbank takeover process for months), it also signaled to the MetroPCS investors that they might be able to squeeze more out of the deal in this way.
        They could solve the problem by boosting the amount on offer for the share swap compensation, rather than doing anything more drastic to change the shape of the company post-merger.

  • Whitney

    WOW this should be fun

  • umad

    ahh… It looks like T-mo has no hope in the future.

    Maybe DT better gives up and sell its assets to AT&T or Verizon.

    When there is no T-mo, I will go to Straight talk for sure.

    • Whiskers

      There is always an open door for you if your not happy with T-Mobile.
      See Ya , and don’t let the door hit you on the ass on the way out.

    • davedsone

      No hope? They are making deals left and right, if they don’t acquire Metro they are by no means finished. It was just going to be a big in in bandwidth and customer base. Lets not get crazy…… er.

  • ceegii63

    its either ATT or SPRINT having something to do with this to screw with DT

  • TMOTECH

    My first reaction to this is that if the majority of shareholders did not like the deal then they could simply vote no at the shareholders meeting and the deal would go away. They must not have the votes. So this must be a few shareholders that are also lawyers or have friends that are lawyers trying to make a few bucks.

    • archerian

      maybe they’re hoping if they can create some noise, DT will up the price a bit to keep the deal going… testing the waters, whatever they can wring ..

    • Richard Yarrell

      I will huff and puff and blow your house down..Gosh this is pretty comical. The deal between Tmobile and metropcs will still happen you can trust on that.

      • jonathan3579

        You’re an idiot. Stop stating your opinion as facts.

        • http://tmonews.com David

          Richard, try and remember not everyone sees things like you do.

        • jonathan3579

          Understood and agreed. ;)

        • Richard Yarrell

          Thank God I am neitherofthese Internet troll @squiddy20 and this Jonathan . Neitherare Tmobil customers I amand love Tmobile for what they bring it’s customers . Squiddy20 needs take his stupidityback to sprint with his 3g Galaxy Nexus.And thisitotherBozo mustthink he’s special what a troll.

        • squiddy20

          “Thank God I am neitherofthese Internet troll @squiddy20 and this Jonathan” And yet I just got 4 emails in the span of a half hour all saying “yarrellray wrote in response to squiddy20: …” Congratulations. You are a troll and a liar to boot.

        • Richard Yarrell

          @jonathan…You mustrreallythink yourssomeone along with that other jerk squiddy20.My opinión ismy business if you don’t like it don’t respond . In reallife you’d getpimp sleep if I had too.

        • squiddy20

          Except you state your “opinion” as fact, and it’s usually utterly wrong. You “knew” the Galaxy Nexus would be on Verizon 3 different times in November, and were wrong each time. You “knew” the Note 2 would launch in August, and then October, but that obviously didn’t happen. You “knew” the processor in the Sensation was crappier than the exact same one found in your “legendary” Evo 3D, despite many people (myself included) telling you otherwise.
          “In reallife you’d getpimp sleep if I had too.” Does that mean I’d sleep like a pimp?! I’d LOVE to sleep like a pimp! /s Don’t try too much harder Richard. You might hurt yourself.

      • squiddy20

        Oh really? And how do you know this? Were you involved with the talks between DT and Metro? Are you one of the people behind the scenes who will approve the deal, a deal that T-Mobile’s own people have said won’t be completed till sometime in 2013? Do you have a source on the inside telling you all these “facts”? Or is this another one of your “famous predictions” that will undoubtedly be wrong?

        • Richard Yarrell

          Guess things over in the Sprint forums mustbe pretty boring.DDo you’re self a favor and stf

        • squiddy20

          1. I don’t really participate in the “sprint forums”. Don’t need to.
          2. It’s spelled “yourself”. And you constantly insult me about being a “useless college boy”? Ha. At least I sound older than I am rather than like a bratty 8 year old.
          3. You’ve failed to answer any of the questions I posed to you, so that must mean you’re none of the above. Which means you’re pulling all this “knowledge” out of your ass. Wanna try again?

        • Richard Yarrell

          @ squiddy20DonDon’t have time toworryany ofyoursilky questions it’s pastyourbedtime nowyyoung man . find some place else todo yourtrolling.Go tososprint I’msure they would love howbrightyou are there.YYou should fitinprettywell with all those dopes.

        • squiddy20

          Man. That’s got to be the hardest piece of garbage to read that you’ve ever written. Just trying to read it gives me the feeling that you’re a chronic stutterer. Don’t you proofread?
          Anyway, how is it “past my bedtime” when you wrote this somewhere around 7 AM? Most people are getting up at this time to go to work. Additionally, I wrote my previous response around 7 PM, which is only a few hours after most people get off work.
          I’m also curious as to what “silky questions” are. Come on Dick. You’re making this way too easy. You insult me about my intelligence and yet you can’t even spell a whole sentence correctly. How very sad and hypocritical of you.

      • Gouv

        Actually…. you can’t “trust on that”. Legal power is… well… VERY powerful. You’d be surprised at how much power share holders can muster together. The deal will LIKELY happen but it’s just bad business to “trust on that”. Also, lets face it! Metro PCS shareholders are not being jerks for being unhappy about this. They are facing a potential and unfair loss considering DT would want metro to be under valued pre-acquisition. Your opinion is your opinion indeed but I think it pisses people off when you claim this with what seems to be arrogance when you clearly don’t seem to have a great sense of how things like these work.

        • jonathan3579

          Thank you for your acute observation. :) It’s a relief to see that there are still people on here with more than just their internal “pimp” guiding the way.

  • http://about.me/daylondeon Deacon

    can we not have a merger, buyout, takeover whatever without any drama these days? lol

  • evilbox

    Wtf this is so dumb. They are getting a damn good deal and obviously dt would have control seeing as they are the ones doing the buying…

  • Mr. Nate

    Current metropcs stock trading at $11.56 per share. They get a 1 to 2 split with shares estimated to be worth $12.48 per share and a cash payment of $4.09 per metro share. That’s a grand total of $29.05 that they gain for every metro share that is currently trading at $11.56. I guess i dont see the injustice when they’re possibly getting a 251% return on their current investment.

    • philyew

      It’s a 1 FOR 2 share swap, which reduces their shareholding in MetroPCS. The value of their new holding in the merged company, as yet, uncertain. TM probably do need to add some to the pot to keep this from messing with the timing of the deal.

      • Mr. Nate

        I stand corrected. Yeah the deal ain’t so sweet then. However, they still get to be invested in a company that has more potential to grow and increase market capitalization.

        I guess if had been a normal stock split and not reverse my math would have been correct (besides the obvious speculation on the evaluation). Its good to learn new things…

  • mrsteel74

    This is nothing more than a chunk of speculators crying they won’t make as much off of their stock as they are hoping for. They are claiming the stock will be worth $18.00 a share which is higher than the $12.48 a share the stock will be priced at after the merger. Currently the stock is at $11.44 a share.

  • Joseph Tongret

    The wireless business is so cut throat! It’s not about which carrier provides the best services, but rather which carrier has the best legal team! Lol

  • davedsone

    Well, there goes that deal.

  • Paul

    Money brings out the worst in people, and companies just amplify it.

    I don’t think it’s a lack of votes, I think this is being publicized to as some transparency to what has been going on. The first “talks” to see if both sides could agree were fast, in my opinion, and I had a feeling that some party was being kept in the shadow.
    Welp, if had a few million I’d buy DT out and make some profit.

  • eanfoso

    Talk about being greedy o.O haha let them have it their way, metro pays us 150$ million, and their stuck will probably trade around sprint’s (5$ mark) hehe free money for our current refarming!!! :D

    • philyew

      If the deal is sub judice, then the breakup settlement which is a part of that deal will also be sub judice.

      While the claim that their shares should be valued at $18 is ludicrous, there does seem some merit in the argument that the offer to the general shareholder is less than the current value of their shares.
      It is also possible that the board has set up more favorable terms for themselves and neglected their fiduciary responsibilities to the general shareholders.

      • eanfoso

        Hehe sucks for them! Lol but I really doubt they set up more favorable terms, being that DT has to pay a bigger amount (250$ million) than metro, that right there is favorable lol

        • philyew

          I’m talking about the MetroPCS board negotiating terms for themselves that were more favorable than the rest of the general shareholders of MetroPCS.

          That is what is being claimed in the lawsuits and, if the details described in support of this claim are true, then they very well might have breached their responsibilities.

        • archerian

          I wonder if there are any golden handshakes/parachutes and bonuses already tied to this deal happening.. if Tmo has a $150M breakup fee, I’m pretty sure there are…

  • UMA_Fan

    So the shareholders vote then Tmobile proceeds with the deal right? It sounds like the majority of shareholders are for the deal.

    What case can they present to the court to stop this deal? An under evaluation is not against the law.

    • tj

      I think that if they could prove that management and a certain privileged group of stock holders were getting extra incentives that the common stock holder does not, they could say that the deal is unfair because not all stock holders are treated equally and the deal should benefit all involved in a representative manner.

      • Adrayven

        Yea, the trick is though, they have no real evidence. They are just speculating and then hoping that during the discovery process they will find something from the documents, emails, etc.

        Again, it sounds like they are just pushing for more.. they have not even voted yet, that speaks volumes right there.

  • tj

    As a tmo customer who stands to gain better reception in key markets where I frequently travel, I would really like for the deal to go through. That being said, fair is fair, and based on the first paragraph of this article, it seems to me that current pcs stock holders stand to lose a lot. their stock is currently valued at 11.33 per share. they are only going to be paid 4.09 per share that they lose in the reverse split or for each share they own (i don’t know which is the case). Once the split takes place, their shares are expected to be valued at 12.48 per share (please someone let me know if I have misunderstood the premise) given that outline, lets take a simple number of shares on which to do a quick analysis, say… 10 because it multiplies easily. If I had 10 shares, my current stock value would be 113.30. when the deal takes place, I will have 4.09 per share plus the value of my remaining 5 shares (since the number of shares i own was cut in half.) if the deal is that I get 4.09 per lost share, that is 20.45 that I get in a cash payment plus the value of my remaining 5 stocks which will be 62.40 so what I end up with is 82.85 when I originally had 113.30 I don’t think that is an acceptable loss. if they are paying 4.09 per share that I own and then I still keep half of my shares, I would get a cash payment of 40.90 to which we add the value of my remaining shares, (62.40) which is still only a total of 103.30. either way, I lose. What I may stand to gain is that I won’t have stock in a sinking company, but rather a more robust company that seems to have a more stable stock price. but that is not a guarantee. If I were an average stock holder, I would be annoyed with if not outspokenly against the merger as well.

    • philyew

      That’s how I read it as well. I figure if TM were to contribute a further $1 per share in compensation, they would be close to matching the current share value.

      That would add around $375 million to the cost of the deal, but DT have already said they are willing to put more money in to counter-act a rival bid, so they clearly see greater value in the deal being done.

      As I’ve said already, I do think that DT brought this on their own heads by preemptively declaring they were willing to up their offer in order to dissuade counter-bids.

    • JR69

      I agree, not the best, at least now for PCS shareholders. TMO should compensate PCS shareholders somehow. If the merger goes through and TMO/PCS gets rolling and start to bring in customers, the share price will increase.

    • Barry

      There has to be something wrong with the $12.48 post merger share price. PCS has 363M shares, so with 2-1 reverse split, PCS will have 182M shares. Since those 182M shares are only 26% of combined PCS/TMO stock, the total number of shares would be 725M. At $12.48, the market cap would be $9B. PCS’s current market cap is $4B. I refuse to believe TMO’s market cap is only $5B.

  • http://www.facebook.com/people/Jeremy-Washington/100000190010519 Jeremy Washington

    in may 2011 $18.68 current traded at $11.88 yesterday today $11.33 its dt fault for announcing they will up there bid if challenged

    • eanfoso

      For what again??

  • Todd

    Actually, the term shareholders is misleading. It was one investor. One. His name is Paul Benn. He filed the lawsuit. It’s not like all the shareholders are up in arms over this. Again, it’s one person, but somewhere along the way, a linked title got changed from “Investor” to “Shareholders”.

    • philyew

      The original report said that there was more than one suit. I’m not arguing numbers – one or a thousand – if it turns out to have some merit in law then this deal could be tied up for some time.

      The raw numbers do suggest that what the general shareholders are being offered is less than the current value of their shareholdings, and if the detail of the terms for board members is accurate, then they may have breached their fiduciary responsibilities.

      Either way, as long as the case isn’t dismissed out of hand, then this could disrupt TM plans.

      • OnlineRefugee

        While this shareholder has filed for an injunction to stop the deal, those are very, very difficult to obtain.

        There’s elements on a “checklist” that one must satisfy to get an injunction. I won’t discuss them all, but the ones I see this guy not satisfying, and therefore NOT getting an injunction to halt the deal:

        - Irreparable harm (Think of this as the court preventing the sale of a rare car. If the car is sold and you can’t get another, that would be irreparable harm, if the sale is not halted.) There’s no irreparable harm here. Basically, the world is not going to stop for all involved if the deal goes through.

        - Adequate remedies at law – If this deal goes through, there’s adequate remedies available, such as suing for damages. This is the big one. A shareholder can simply sue for the difference between share price that they received and what he alleges would have been a fair price. Calculable damages are the main reason injunctions are not granted.

        - Likelihood of prevailing on the merits – This is another big one. While a plaintiff will always argue “of course I am going to win” the courts are not so optimistic.

        About the only time you see injunctions granted are in trade secret cases, where plaintiff KFC has absolute proof that someone stole “Col. Sanders Secret Recipe” and is about to sell it on Google Play for 99 cents to 5 million people.

        I don’t see this guy getting an injunction for any one of these reasons. Even if there was a breach of fiduciary duties, that’s not a sufficient basis to stop the deal. If that was the standard those with ulterior motive would file lawsuits alleging such, every time.

    • umad

      Interesting!!! Can you give me that link?

      It may be a good news for us and DT (also MetroPCS). Just send someone to make him disappear!

  • http://www.facebook.com/xmark.live Xmark Live

    why don’t T-Mobile just buy all of metro…and end all of this ish 1

    • philyew

      Several reasons I can see:

      1) Cash flow. A full buy out by DT would require full cash compensation. Closer to $8 billion up front, rather than the $1.5 billion currently committed.

      2) As much as anything, DT want the deal to enable TM USA to become a listed company, giving them a better way out of the US market, if they choose. It has to be a reverse take over to achieve that.

      3) Whatever the deal, it still has to receive shareholder and federal approval.

  • guest1234

    at what cost for the economy, people are struggling to survive, but raising prices for all. is it justfied?
    i thing criket and metro pcs should join forces to fight the big four. then we will see the big four struggle. don’ t feed the four hippos. feed the antalope