MetroPCS Communications, Inc. (NYSE: PCS) saw its shares recover handily and shares were halted briefly after Bloomberg reported that Sprint Nextel Corporation (NYSE: S) was likely to try to make a counterbid to acquire MetroPCS. The long and short is that anything is possible when it comes to M&A. That being said, Sprint's board of directors should be flogged by shareholders if it goes after MetroPCS.
All that matters is that investors have to go back to the start of 2012. CEO Dan Hesse was reportedly blocked by Sprint's board of directors from trying to acquire MetroPCS. Back then Sprint shares were not signaling a recovery. The issue to consider is that Sprint Nextel shares are up about 150% from the 52-week low. its market cap is now $15.2 billion.
The problem in chasing MetroPCS at this point is that the market value is over $4.3 billion and shares literally doubled from the lows seen over the summer. If Sprint really still wanted to acquire MetroPCS, perhaps it should have tried to strike when MetroPCS was down on its back.
Deutsche Telecom's T-Mobile unit shares criticism here. The company received a whopping $4 billion breakup fee from AT&T Inc. (NYSE: T) after AT&T could not secure regulatory approval to acquire T-Mobile for almost $40 billion. T-Mobile is paying 100% higher than what it might have had to pay against the lows of the summer. In all fairness, we do not believe that the MetroPCS board of directors would have sold for half of the current price just because its shares were down. Still, after a 100% rally in MetroPCS shares it is going to be hard for T-Mobile to claim it is getting the best deal it could have gotten.
Leap Wireless International Inc. (NASDAQ: LEAP) shares are down another 6% at $5.85 today. Perhaps if MetroPCS is going to get a rival bid then this one is not as attractive.
Id MetroPCS really wanted to create a larger long-term value situation, it should tried to rekindle its failed merger with Leap Wireless. The companies could not reach terms before, and that was when shares were higher as well. That merger could still come as one of need rather than a merger of greed.
As far as what investors think of Sprint Nextel Corporation (NYSE: S), the rumored counterbid is not considered a new value-add. Sprint shares are down almost 3% at $5.02 on the day. Shares were up at $5.60 before the MetroPCS hype came into the market this week.
JON C. OGG
Filed under: 24/7 Wall St. Wire, Mergers & Acquisitions, Rumors, Telecom & Wireless Tagged: LEAP, PCS, S, T