In a letter to his counterpart at MetroPCS, Leap CEO Douglas Hutcheson said the proposed $5.5 billion all-stock merger inadequately values his company's growth prospects. Leap published the letter in a
Hutcheson also questioned the timing of the proposal and the manner in which it was made. He wrote that Leap had repeatedly reached out to its rival regional wireless service provider about a possible merger or partnership, to no avail. He said MetroPCS then made its offer publicly without first engaging Leap's management in substantive talks.
"We can only conclude that you recognize Leap's compelling long-term growth prospects and that your aggressive approach is intended to try to opportunistically capture a disproportionate share of this value for your shareholders prior to an increase in our relative valuation," he wrote.
MetroPCS proposed the deal earlier this month, offering 2.75 of its shares for each Leap share. That represented only a 3% premium, based on the levels where the companies' shares closed Aug. 31, the last session before MetroPCS made its offer. Leap shares ended that session at $72.50, down about 27% from the 52-week high of $99.04 they hit in late July.
MetroPCS had defended its bid by saying that since MetroPCS went public in April, Leap's stock price has traded "in part in anticipation of a merger between the two companies."
Both companies sell flat-rate monthly wireless service in select cities in several states. The services target customers who use a wireless phone as their main phone and don't want contracts and credit checks.
Leap shares finished trading Friday down 18 cents at $74.32. MetroPCS ended the session up 31 cents at $25.10.