An influential proxy advisory firm recommended late on Wednesday that shareholders of MetroPCS reject the cellphone service provider’s proposed merger with T-Mobile USA, adding pressure to a deal already under fire from several big investors.
The firm, Institutional Shareholder Services, largely agreed with major shareholders who have objected to both the debt that the merger would place on the combined company and the stake that MetroPCS shareholders would own of the new entity.
Those investors include Paulson & Company, MetroPCS’ biggest investor with a nearly 10 percent stake, and P. Schoenfeld Asset Management, which owns over 2 percent. (T-Mobile’s chief executive, John Legere, attacked both obliquely on Tuesday as “greedy hedge funds.â€)
“The ultimate question for PCS holders, therefore, is whether this offer is sufficient compensation for putting control of their investment in the hands of another strategic, DT, under whose control T-Mobile has appeared to have so vastly underperformed,†I.S.S. wrote, referring to current T-Mobile parent Deutsche Telekom.
Representative for MetroPCS and T-Mobile wasn’t available for comment.
The recommendation by I.S.S., the biggest of the proxy advisers, can have a significant influence on major institutional investors, some of whom regularly vote based on the firm’s recommendations. But other investors are ignore its proclamations, and some deals have been approved over I.S.S.’ objections.
In its report, I.S.S. questioned the rationale of the merger, which would significantly bolster T-Mobile in its fight to become the country’s biggest low-cost cellphone service provider. Announced in October, the deal would give MetroPCS shareholders a 26 percent stake in the combined company and would pay them about $4.09 a share.
But the advisory firm questioned the rationale for joining with T-Mobile, which has historically struggled against bigger rivals like AT&T, which failed to buy the company for $39 billion two years ago, and Sprint.
