*Yes, I know that is for Verizon, but neither company has such a snappy catchphrase.
Paulson & Co., of multibillion dollar mortgage short fame, owns about 9.9% of the MetroPCS outstanding stock, making it the largest shareholder. Paulson sent some static over the wires in a letter to the MetroPCS (PCS) board opposing its announced merger with T-Mobile because:
- the deal structure packs on too much debt, more than double Verizon’s (VZ) debt as a ratio to estimated EBITDA
- the interest rate on the debt (7%) is too high. Sprint’s (S) 7% 2020 notes only yield 4.2%, which itself is double AT&T’s (T) 2020 notes
- the equity split with T-Mobile is unfair on the basis of MetroPCS’ contribution to the combined company’s value (42%) versus the MetroPCS shareholders stake in the combined company (26%). In addition, MetroPCS is doing well while T-Mobile is struggling
Paulson said they would support a restructured deal with less debt at a better interest rate.
P. Schoenfeld Asset Management LP, another large MetroPCS shareholder, has also opposed the merger and is soliciting proxies in opposition.