Shares of Leap Wireless International took a nice jump Sept. 4 when similar, but larger, flat-rate cell phone carrier MetroPCS Communications of Dallas offered to buy the company for an aggregate $5.5 billion.
The news of MetroPCS’ desire to buy it sent Leap shares up nearly $11 to $83.47 on Sept. 4 when 6.4 million shares traded hands, or five times the daily average float.
The deal, announced in a letter to Leap’s board, calls for a stock transaction that would yield 2.75 shares of MetroPCS common stock for each share of Leap Wireless.
Based on a trailing 20-day average price of MetroPCS stock, the proposed exchange ratio implies a value of $77.89 for each share of Leap, according to a statement from MetroPCS. The company also said it would assume or refinance about $2 billion of Leap’s outstanding debt.
Combining the two flat-rate carriers has been talked about for years by analysts and industry observers who surmise that the combined company would be far more competitive than the two entities operating separately.
“The combined company will create a new national wireless carrier with licenses covering nearly all of the top 200 markets in the United States,” said Roger Linquist, chairman and chief executive officer of MetroPCS.
Leap spokesman Greg Lund said the company is still reviewing the letter and would not comment further.
Should the transaction take place, MetroPCS would own 65 percent of the newly created corporation, and Leap’s shareholders would own 35 percent.
Since it returned to the public market in June 2006 after emerging in 2005 from bankruptcy protection, Leap stock has been bounding upward. For the year ended in August, it gained more than 50 percent, and in late July it was trading just below $100.
Subsequently, shares of Leap, traded under LEAP on Nasdaq, declined to the mid-$50s in mid-August, but regained much of that loss and traded at $72.50 as of Aug. 31.
The 52-week range for LEAP is $46.57 to $99.04.
, Mike Allen