Hedge Funds Drop Campaign Against T-Mobile’s Bid for MetroPCS

The most outspoken opponents of T-Mobile USA’s bid for MetroPCS are backing off following an improvement in the takeover offer’s terms.

Both Paulson & Company and P. Schoenfeld Asset Management indicated on Thursday that they would support the revised proposal by T-Mobile’s parent, Deutsche Telekom.

Under the provisions of that new scheme, the combined company would cut the amount of debt it would assume by about $3.8 billion, and the interest rate on those borrowings would fall by about half a percentage point.

Deutsche Telekom also agreed to stay an investor in the combined company for 18 months instead of 6 months. The German telecommunications giant will hold onto a 74 percent stake, while current MetroPCS shareholders will keep a 26 percent stake.

While Paulson & Co. said that it needed to review MetroPCS’ proxy statement to make its final decision, the hedge fund said that it intended to vote for the sweetened proposal.

P. Schoenfeld said that it would drop its proxy solicitation campaign and support the new deal as well, even if the investment firm didn’t get everything it was looking for. Besides cutting the amount of debt and lowering the interest rate, the shareholder had recommended a bigger equity stake in the combined company for current MetroPCS investors.

But to the arbitrager, the newly revised deal is still a winner.

From P. Schoenfeld’s statement:

“While the revised transaction terms do not reflect all the improvements we were seeking, we feel our central goal of making the combined PCS/T-Mobile company more competitive and valuable for all shareholders, including Deutsche Telekom, resulted in obtaining superior value for PCS shareholders and believe that these revised terms are the best available alternative for PCS shareholders at this time.”

The two hedge funds, which together own about 12 percent of MetroPCS’ stock, had largely succeeded in drumming up opposition to the first bid by T-Mobile. People briefed on the matter said that preliminary vote tallies indicated that the original offer would have failed had it been put up to a vote on Friday.