NEW YORK (
) --Shares of
MetroPCS Communications Inc.
slipped in mid-day trading after jumping last week following a recommendation from Institutional Shareholder Services Inc. to vote against the telecom provider's announced merger with T-Mobile USA Inc.
PCS fell 0.1% to $10.89 after adding 4% on Thursday after the ISS recommendation.T-Mobile USA chief executive John Legere had suggested MetroPCS shares would drop if the deal were scuttled.
The transaction would pay MetroPCS investors $4.08 in cash and give them, collectively, 26% of the equity in the combined company. The new telecom would have more than $20 billion in debt, including a $15 billion note provided by T-Mobile USA parent Deutsche Telekom AG.
"[MetroPCS] shareholders must compare what they will receive in the transaction -- approximately $4 in cash per share and retention of 26% ownership in the combined company -- to what [MetroPCS] shareholders will give up -- control, and considerable balance sheet flexibility," ISS stated in its Wednesday report.
Deutsche Telekom would have control of the company's board, balance sheet and strategic direction.
"The ultimate question for [MetroPCS] holders, therefore, is whether this offer is sufficient compensation for putting control of their investment in the hands of another strategic, [Deutsche Telekom], under whose control T-Mobile has appeared to have so vastly underperformed," ISS continued.
MetroPCS responded Thursday that "ISS's report contains material flaws and reaches the wrong conclusion," and maintained that the deal would produce savings and other benefits worth $6 billion to $7 billion. The telecom noted that Egan-Jones Ratings Co. recommended voting in favor of the merger.
P. Schoenfeld Asset Management LP, with about a 2.5% stake, and Paulson & Co., holding nearly 10%, have objected to terms of the merger and the debt associated with the deal. P. Schoenfeld urged MetroPCS to move the shareholder vote from April 12 to late June.
The recommendation from ISS could hold sway with stock index funds, suggested Jennifer Fritzsche of Wells Fargo Securities LLC in a note. "In our view, TMobile is too far along the path to walk away from this deal," Fritzsche wrote.