MetroPCS, at least you have Egan Jones.
The cellphone service provider was dealt another blow to its proposed merger with T-Mobile USA on Friday, as a second major proxy advisory firm recommended that investors reject the deal.
In its report, Glass Lewis & Company found the proposed transaction lacking in significant ways, from the way that MetroPCS agreed to the T-Mobile deal to the amount of compensation that shareholders will receive.
The firm joined its larger rival, Institutional Shareholder Services, in casting aspersions on the transaction. Both sided with two big shareholders who hold over 12 percent of MetroPCS’ stock and have called on the company to demand better terms or walk away.
The combined opposition of I.S.S. and Glass Lewis raises the pressure on MetroPCS and T-Mobile to sweeten the terms of the merger or risk defeat. MetroPCS shareholders are scheduled to vote on April 12.
Together, I.S.S. and Glass Lewis are considered the major players in the field of proxy advisory firms, which counsel clients like big institutional investors on how to vote in corporate matters. While the influence of the two has waned over the years, their recommendations still carry weight with many shareholders.
T-Mobile’s parent, Deutsche Telekom, is weighing whether to offer concessions or to walk away from the deal, people briefed on the matter said this week.
It isn’t clear whether the German telecommunications giant is willing to give up further control of the combined company or take a chance that it can strike a deal for its American subsidiary with another suitor, including either a newly revitalized Sprint or Charles Ergen’s Dish Network.
Like I.S.S., Glass Lewis raised questions about the terms of the deal, including a payout to shareholders of over $4 a share and a cumulative 26 percent stake in the combined company. It also contended that the amount of debt the merged entity would owe could clamp down on its ability to make investments in new business opportunities.
In some ways, Glass Lewis went further than I.S.S. in its criticisms, questioning why MetroPCS didn’t pursue a full auction of itself before settling on a deal with T-Mobile. While the proxy adviser acknowledged the upsides of the merger â€" helping the largely regional MetroPCS become a nationwide carrier â€" the firm argued that T-Mobile and Deutsche Telekom appeared to have the upper hand in negotiations throughout the process.
“As constructed, the agreement appears to undervalue MetroPCS’ contribution to the combined company and offers shareholders a merger consideration that does not fairly value MetroPCS in a takeover by Deutsche Telekom,†Glass Lewis wrote in its report.
