Deutsche Telekom is preparing to sweeten a bid by its T-Mobile USA unit for MetroPCS, after running into fierce resistance from shareholders of the target company, a person briefed on the matter said on Wednesday.
The German telecommunications firm is likely to offer to cut the amount of debt that the combined company will bear, as well as reduce the interest rate of those borrowings, this person said. The move will essentially improve the overall value of the merged entity’s equity.
An announcement could come as soon as Wednesday evening, this person added. The newer offer is likely to delay a vote on a deal, which had been scheduled for Friday, by at least a week.
Deutsche Telekom is expected to label the new offer as best and final, in what is likely to be viewed as a challenge to MetroPCS shareholders who have called the current deal inadequate.
Under the present terms of the offer, MetroPCS shareholders would be paid about $4.09 a share and receive a 26 percent stake in the combined company.
But investors like the hedge funds Paulson & Company and P. Schoenfeld Asset Management appeared to have gained the upper hand in the fight thus far. Shares in MetroPCS risen steadily this year, as shareholders expected an improved offer to come, and people involved in the merger have said that the current offer is likely to fail if put to a vote.
Paulson & Company and P. Schoenfeld have argued that the T-Mobile bid as it stands would add too much debt and at too high a price. They have called on Deutsche Telekom to reduce the amount of leverage on the combined American telecom.
Proxy advisory firms like Institutional Shareholder Services have largely sided with the hedge funds, putting additional pressure on Deutsche Telekom to consider raising its offer.
News of Deutsche Telekom’s deliberations was reported earlier by Dow Jones.
