Leap Wireless International Inc., the San Diego parent company of Cricket flat-rate wireless service, rejected an offer made this month for the company from MetroPCS Communications Inc., a Dallas flat-rate wireless carrier.
In its Sept. 16 letter to MetroPCS, Leap said the Sept. 3 offer of 2.75 shares of MetroPCS for each share of Leap, or $69.03 per share, “does not properly reflect Leap’s strong growth and significant growth potential and would severely under-compensate Leap’s shareholders.”
MetroPCS, which went public about five months ago, made the unsolicited offer valued at the time at an aggregate $5.5 billion. The offer included assuming Leap’s outstanding debt of $2 billion.
Leap raised concerns about MetroPCS’ ability to grow its business in line with shareholder expectations, and cited the company’s short-term performance hinges on MetroPCS’ rollout of service in Los Angeles and New York.
“While our two companies may share the same basic business model, Leap is better positioned to execute and capitalize on industry growth opportunities,” stated Leap in its letter to MetroPCS.
MetroPCS said Sept. 17 that it was disappointed Leap’s board rejected its proposal. “The contacts we have had with a number of Leap’s shareholders indicate that they want to see a combination of our two companies happen without unnecessary delay. It appears that Leap’s board is ignoring the will of its shareholder base,” said Roger Linquist, MetroPCS chairman, in a letter replying to Leap.
Analysts generally shrugged off the rejection, and said combining the two companies makes sense.
“This is not a final rejection, but the next volley in what we expect to be continued negotiations,” said Lehman Bros. “In our view, a deal between these companies is still likely.”
Leap shares, traded under LEAP on Nasdaq, lost $1.07 in midday trading Sept. 17 to $73.25, while MetroPCS shares, traded under PCS on the New York Stock Exchange, were down 44 cents to $24.67.
, Mike Allen