MetroPCS Bids for Rival Leap Wireless

Discount wireless provider MetroPCS Communications made an unsolicited bid to buy rival Leap Wireless for about $5.5 billion in stock Tuesday. MetroPCS proposes to exchange 2.75 shares of its stock for each share of Leap. Based on Friday's close, that makes the bid worth $75.04/share -- a 3.5% premium. MetroPCS would also absorb $2 billion of Leap's debt. Both firms offer prepaid phone plans and share overlapping markets. If the deal goes through, the combined company would have 6.2 million subscribers, and "create a new national wireless carrier," said Roger Linquist, MetroPCS CEO. "The shareholders of both companies will have the opportunity to participate in the upside potential" and will "benefit from being a part of a larger, more diversified organization." Combined synergies between the two companies are forecasted at about $2.5 billion over an unspecified time frame, and both companies will have an easier time retaining customers since they will cover all markets. Leap shares were up 15% to $83.47, while MetroPCS shares increased 5% to $28.65 during Tuesday's session. Leap's closing price was greater than MetroPCS's announced bid, signifying investors think there may still be higher bids.

Sources: Press Release, Reuters, AP
Commentary: Metro PCS Communications: The Bull Case • How Does MetroPCS Compare With the Wireless Titans?
Stocks/ETFs to watch: LEAP, PCS. Competitors: S, VZ. ETFs: WMH, PRFQ

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