MetroPCS shareholders have filed suit in Dallas County Court against the carrier, Deutsche Telekom and CEO Roger Lindquist in order to halt the reverse merger between it and T-Mobile USA.
The suit, filed earlier today alleges that the carrier is being substantially undervalued in comparison to its current stock price and that the merger is unfairly favoring the executive team at the expense of the shareholders by offering generous payouts to executives while offering no such payouts to majority shareholders.
Citing historical stock pricing as high as $18.69 in 2011, the shareholders allege that the $12 valuation for the reverse merger is too low in comparison to its projected revenue for this year and that merger was designed from the outset to favor DT/T-Mobile USA to the exclusion of other potential bidders, even going as far as having MetroPCS board members approve special provisions such as a no solicitation clause in order to prevent other potential bidders and offers from competing.
The suit also confirmed that MetroPCS and T-Mobile agreed to a matching rights provision that would allow T-Mobile to match any outside offers along with a $150 million fee payable to T-Mobile/DT should MetroPCS have accepted a superior offer.
“The process leading to the proposed acquisition was tainted by conflicts, tilted towards T-Mobile and driven entirely by the board and company management, who together control 15.4 percent of PCS’ outstanding stock and seek liquidity for their illiquid holdings, MetroPCS’ officers and directors will receive millions of dollars in special payments – not being made to ordinary shareholders – for currently unvested stock options, performance units and restricted shares, all of which shall, upon the merger’s closing, become fully vested and exercisable.”
“Based on market estimates, the combined company is expected to have 2012 pro forma revenues of approximately $24.8 billion and cost synergies of $6-7 billion,” the complaint states. “The deal is expected to result in accelerated financial growth with estimated five-year compound annual growth rate for revenues, earnings before interest, taxes, depreciation and amortization and free cash flow in the range of three percent to five percent, seven percent to ten percent and 15 percent to 20 percent, respectively.”
The shareholders are seeking injunctive and declaratory relief for derivative and class claims of breach of fiduciary duty, abuse of control, gross mismanagement, unjust enrichment and corporate waste with representation by Willie Briscoe of Dallas. T-Mobile USA, Deutsche Telekom and MetroPCS have yet to officially respond to the claims presented in the suit.