As the shareholder vote at MetroPCS loomed this Friday, Deutsche Telekom faced the possibility that it’s proposed merger with T-Mobile USA might not carry the day. Speculation had been rising for weeks that they would blink, and in fact that’s exactly what they have now done – to an extent.
The German giant sweetened the deal slightly by both reducing the debt burden for the combined company by $3.8B and by lowering the interest rate by 50 basis points. The debt reduction improves the valuation by $2.67, bringing the combined company’s debt down to $11.2B. The equity share remains the same, with 74% in DT’s hands and 26% in MetroPCS shareholder hands.
Will being thrown this bone be be enough to satisfy the deal’s critics? Well, not all of them I’m sure, but they don’t need all of them. They just need majority approval, and it was already going to be close. The shareholder vote itself has now been postponed until April 24 in light of the modified terms.
This deal really ought to be win-win for both parties, in that while there’s no guarantee that the combined company will win, it is less likely to lose than either of the two would as individuals. DT wants to give its US division a path forward with some separation from the parent, and MetroPCS has spectrum but is just too small to really challenge the top four. I’m guessing the opposition to the deal will take a step back from the brink now, but you never can tell.
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