Leap Wireless (NASDAQ:LEAP) said it struck a deal with investor Pentwater Capital Management to bury their proxy battle, and will nominate two new board directors Pentwater had named earlier this spring.
Leap said that as a result of the deal, Pentwater, which held 4.8 percent of Leap's stock at the end of March, will withdraw its slate of three nominees to Leap's board of directors and vote for Leap's nominees. In a statement, Leap said it will nominate Rick Roscitt and Robert Switz to its board, and noted that Leap nominee Paula Kruger will stand for election at the company's annual general meeting Thursday. As a result of the deal, Leap's board will increase from eight members to nine.
Roscitt and Switz, telecom industry veterans, were among the slate of three directors Pentwater named in March when it launched its campaign to shake up Leap's board and accused the company of mismanagement. Pentwater had also nominated its CEO, Matthew Halbower, who will not become a director. Roscitt is the CEO of wireless company SMobile Systems and former president and COO of MCI. Switz is the former CEO of ADC Telecommunications (which is now owned by TE Connectivity, the former Tyco Electronics)
In a research note, Credit Suisse analyst Jonathan Chaplin said that the move improves the odds of a deal in the future with Leap's flat-rate competitor MetroPCS (NYSE:PCS).
"To be clear, we believe MetroPCS is acutely focused on securing more spectrum at present, and merger discussions with Leap may be a ways off even with a change in the board," he wrote. "Nevertheless, a change in the board could give MetroPCS a more predictable negotiating partner if they do pursue talks at some point in future."
Leap reports its second-quarter earnings Aug. 3, and Chaplin said the results could be challenging with higher churn and cost per gross addition.
- see this release
- see this Bloomberg article
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