Leap Wireless on Sunday rejected an unsolicited $4.7B buyout bid from MetroPCS saying it "dramatically undervalues" the company's business. In a letter to MetroPCS CEO Roger Linquist, Leap CEO Douglas Hutcheson said the surprise offer was "completely inadequate" in critical areas such as failing to account for Leap's growth prospects and how well positioned it is for future build-outs. In contrast, he wrote, MetroPCS faces delays in launching in Los Angeles, and has a tough roll-out ahead in New York. The offer of 2.75 MetroPCS shares per Leap share values Leap at $69.03/share, which Hutcheson noted represents a 14.4% discount to Leap's 60-day average trading price prior to the offer on September 4. Leap shares were at $74.32 Friday, indicating expectations of a higher bid. One analyst said MetroPCS may have to offer as much as 3.3 shares to be successful. The offer, at 8.5 time Leap's estimated Ebitda, lags the nine-times multiple of other recent deals. MetroPCS said it was "disappointed" with Leap's response, that it continued to believe the offer was fair, and that it would review its options.
Sources: Press release, Wall Street Journal, Bloomberg, Reuters
Commentary: MetroPCS Bids for Rival Leap Wireless • Best and Worst Performing Stocks, Labor Day 2007
Stocks/ETFs to watch: LEAP, PCS. Competitors: S. ETFs: PTE, WMH
Earnings call transcript: Leap Wireless Q2 2007
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