The investment firm Paulson & Company, the largest shareholder in MetroPCS Communications, announced on Thursday that it would oppose a planned merger with T-Mobile, saying the deal would saddle the new company with too much debt.
“We believe MetroPCS is worth more as a stand-alone company,†the firm, founded by the billionaire hedge fund manager John Paulson, said in a statement. The firm has a 9.9 percent stake in MetroPCS.
Last October, the two companies announced a complex transaction, under which MetroPCS would conduct a 1-for-2 reverse stock split and pay out $1.5 bllion in cash to its existing shareholders. The new company would then issue new stock worth about 74 percent to T-Mobile’s parent, Deutsche Telekom, leaving existing MetroPCS investors with a 26 percent stake.
P. Schoenfeld Asset Management, another large shareholder with a 1.6 percent stake in MetroPCS, announced earlier this month that it was leading a proxy battle opposing the merger.
The deal has not been viewed favorably by the markets, and MetroPCS’s stock is down about 32 percent since before the deal was announced.
In a letter to the MetroPCS and Deutsche Telekom boards on Thursday, Mr. Paulson outlined several issues he had with the merger, including that T-Mobile’s performance ha! s been “poor.â€
He did conclude in his letter, however, that he would support a restructured deal that reduces the new company’s debt by $6.6 billion and lower its interest rate to 4.2 percent.
“Indeed, Paulson believes this lower debt and lower interest rate will result in a significantly improved multiple for MetroPCS/T-Mobile, increasing the economic return not only to MetroPCS shareholders, but also to 74% owner Deutsche Telekom,†he wrote.
Officials for MetroPCS and T-Mobile could not be reached immediately for comment.
