MetroPCS not in merger talks with Leap - source
Low-cost wireless carrier MetroPCS Communications Inc is not in merger talks with rival Leap Wireless International Inc, a source close to MetroPCS said. But the company was in discussions with bankers about possible deals, the source said.
I know they're talking to bankers. They're interviewing bankers, trying to get advice from banks to help them to conduct a strategic deal, the source told Reuters on condition of anonymity.
There has been increasing speculation over Leap and MetroPCS -- a combination investors have long anticipated -- with some analysts saying the two companies could come together earlier than expected.
Analysts have also said that MetroPCS and Leap could become targets for bigger carriers, such as America Movil, AT&T or Deutsche Telekom's T-Mobile USA.
Asked whether companies had approached MetroPCS, the source said there have been lots of conversations.
Weak second-quarter performances at both companies and growing competition have increased pressure on Leap and MetroPCS to explore a combination.
MetroPCS does not have a sense of urgency about doing a deal, the source said.
You can make a lot of arguments why a deal with Leap makes a lot of sense and sooner the better. But I wouldn't say it's urgent, the source said.
A deal will Leap would depend a lot on the price. And both companies have different views on how much Leap is worth.
Why should there be a premium? the source said. A lot of the so-called premium's baked into the stock. They would be combining shareholder groups, management teams. It's not like one big company buying a little one or buying someone out for cash.
In 2007, MetroPCS made a $5.5 billion bid for Leap at an exchange ratio of 2.75 MetroPCS shares for each Leap share, but Leap rebuffed the offer. If MetroPCS were to acquire Leap at current levels, the exchange ratio would be 2.1.
Leap's market capitalization now stands at $1.46 billion. MetroPCS is valued at $3.12 billion.
Shares of both MetroPCS and Leap are down since they reported weak second-quarter results on Aug. 6.
But Leap shares have recovered 22 percent since touching a low of $15.62 in the weeks following the results. MetroPCS shares have risen slightly in the same period.
MetroPCS shares were up 2 percent at $9.02 in mid-afternoon trade on Friday. Leap shares were up 3 cents at $18.87. (Reporting by S. John Tilak in Bangalore; Editing by Mike Miller and Saumyadeb Chakrabarty)
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