180 degree change for largest MetroPCS stock holder; hedge fund now supports deal after revision

Late Wednesday, Deutsche Telekom made a couple of revisions to its deal to buy MetroPCS. Facing a stockholder vote set for Friday, the German telco realized that without making a change, the merger between the 4th largest carrier in the nation and the 5th largest, was dead in the water. So the amount of debt that the surviving company will be saddled with was cut to $11.8 billion from $15 billion. The interest rate on the debt has also been cut by 50 basis points. The Bonn based company says that the deal will save the surviving carrier $6 billion to 7 billion a year in cost savings.

While the deal didn't change what MetroPCS stockholders will get in the merger, $4.06 a share and a 26% stake in the combined company, the lower amount of debt and lower interest rate means that the surviving company could be flexible enough financially to buy more spectrum. In addition, Deutsche Telekom, which ends up with 74% of the company in the transaction, now promises not to sell any of its shares for 18 months from the deal's closing, up from only 6 months in the original merger deal. That removes some pressure on the stock for the first year and might have been the part of the revision that made hedge fund Paulson and Co. do a reversal to say it now supports the merger and will vote for it. The fund is the largest MetroPCS stockholder and its decisions are watched by other big holders of the stock.

The new date for the stockholder meeting is April 24th. It is the last hurdle required before the deal can close.

source: Bloomberg