Leap Wireless International has rejected the $5.5bn all-share offer from MetroPCS Communications because, though it said it accepts the bid has ‘compelling industrial logic,’ it believes the price in inadequate.
However, in a conference call yesterday, Leap CEO refused to be drawn on what he believed would be the correct ratio in a merged company. Under MetroPCS’s offer, its own investors will hold 65.4% and Leap shareholders 34.6% of the combined company.
In common with MetroPCS CEO Roger Linquist, Leap CEO Douglas Hutcheson offered no clue as to why the two companies are engaged in a public wrangle over valuations, when almost all M&A deals are agreements that follow hard bargaining behind closed doors.
In a letter to MetroPCS rejecting the bid, Hutcheson acknowledged that Leap had long thought and has publicly stated that there could be merit in a strategic combination of the two companies. But he said Leap’s valuation failed to take into account its robust growth prospects. He also said the proposal did not address the status of the announced and pending transition of MetroPCS senior management. He said that without a path to accomplishing and integrating such a major transaction, much of the value proposition and the resulting synergies that MercoPCS have proposed become largely illusive.
Leap said it has repeatedly tried to engage in discussions regarding merger possibilities as well as other possible strategic collaborations, including reciprocal roaming arrangements, partnering in spectrum auctions, swapping of markets or spectrum, and coordinated purchasing.
It said all these efforts were to no avail. It accuses MetroPCS of an aggressive approach intended to try to opportunistically capture a disproportionate share of value for your shareholders.
For his part, Linquist said contacts it has had with a number of Leap’s shareholders indicate that they want to see a combination of the two companies happen without unnecessary delay. It appears that Leap’s board is ignoring the will of its shareholder base, he said.