On the heels of a report from the Wall Street Journal, MetroPCS publicly announced its desire to acquire Leap Wireless for $5.5 billion in stock plus $2 billion in acquired debt for a deal worth $7.5 billion. Leap has not publicly responded to the bid, nor did it take part in the analyst conference call MetroPCS held this morning. Rumors have been circulating since the day the two flat-rate carriers launched that they should merge, but this is the first serious public admission by MetroPCS that it wants to acquire Leap.
"I was surprised to hear that the proposed structure of the new company would be two-thirds owned by Metro[PCS] shareholders and one-third owned by Leap's shareholders," Technology Business Research's John Byrne said. "When comparing the two companies, I would have thought something close to 60 percent [for MetroPCS] and 40 percent [for Leap]."
According to Byrne, the long-rumored deal has taken more than ten years to come to fruition because of "bad blood" between the two companies: MetroPCS always felt that Leap stole its business model and beat it to market, while Leap has long suspected MetroPCS floated acquisition rumors just so it could snatch a peak at Leap's financials. Today's announcement, however,Ãƒâ€šÃ‚Â "makes it pretty clear that MetroPCS really wants to merge," Byrne said.
Leap and MetroPCS both know that this merger is the only obvious one, which is why the pricetag is probably not the final one. Both companies know that Leap is in a pretty big bargaining position to come back with a more favorable compromise, Byrne said.