MetroPCS Communications Inc (NYSE:PCS)’s largest shareholder John Paulson, whose Paulson & Co. owns about 9.9 percent stake of the company, has finally changed his mind. Paulson & Co. voiced support for the proposed merger of MetroPCS Communications with T-Mobile USA after the latter’s parent company Deutsche Telekom AG (FRA:DTE) (ETR:DTE) sweetened the offer yesterday.
Deutsche Telekom AG (FRA:DTE) (ETR:DTE) revised the terms of the merger first proposed in October 2012 to appease the shareholders who were against the original offer. Deutsche Telekom AG (FRA:DTE) (ETR:DTE) said it’s the best and final offer.
Under the revised terms, Deutsche Telekom lowered the debt it would impose on the combined entity by $3.8 billion from $15 billion to $11.2 billion. The German Telekom giant also cut the interest rate it would charge on that loan by 0.5 percent from the previous 7 percent. The merger has already been approved by the Department of Justice and the Federal Communications Commission (FCC)
Paulson & Co. said in a statement today that though it needs to review the revised terms before making a final decision, the fund intends to vote in favor of the restructured merger. Earlier, Paulson & Co. had joined hands with P. Schoenfeld Asset Management to oppose the deal.
Paulson, P. Schoenfeld Asset Management and many other large shareholders of MetroPCS Communications Inc (NYSE:PCS) were concerned that the deal was not in the best interest of shareholders and the new company would be loaded with heavy debt. Yesterday, MetroPCS Communications Inc (NYSE:PCS) postponed the date of shareholder voting to April 24 so that all the stakeholders get sufficient time to review the new terms.
Less debt burden will allow the new company to purchase more wireless airwaves and invest in networks. The proposed merger of the fourth and fifth largest U.S. telecom carriers would help the new company compete effectively with other giants like AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ). The merger is expected to generate $6-$7 billion in cost savings.
Under the deal, Deutsche Telekom AG (FRA:DTE) (ETR:DTE) will own 74 percent of the new company. MetroPCS Communications Inc (NYSE:PCS) shareholders will get 26 percent stake in the new company and $1.5 billion or $4.09 per share in cash.
MetroPCS Communications Inc (NYSE:PCS) shares were down 0.78 percent to $11.47 at 2:36 PM EDT.