Leap Wireless, MetroPCS spar over merger

Both companies say they'd make for an ideal marriage, but they're hashing out a very public pre-nup

The “negotiations” between Leap Wireless and MetroPCS over a proposed merger is all being done in the public spotlight. After Metro's unsolicited public offer to exchange 2.75 Metro shares for every Leap share, Leap rebutted with a rejection letter that not only declined the offer but took some potshots at Metro's operational problems. Metro responded just as publicly, accusing Leap of short-shrifting its shareholders.

Of course, the companies have a history of bickering. Leap is currently suing Metro for allegedly copying its business model, which Metro claims Leap absconded with before either company launched in the previous millennium. Here's a look into the continuing fracas in the words of the companies and their top executives:

Douglas Hutcheson, president and CEO of Leap: “As you know, we have long thought and have publicly stated that there could be merit in a strategic combination of our two companies. Your publicly announced merger proposal, however, is completely inadequate in a number of critical areas.”

Roger Linquist, chairman and CEO of Metro: “The contacts we have had with a number of Leap's shareholders indicate that they want to see a combination of our two companies happen without unnecessary delay. It appears that Leap's board is ignoring the will of its shareholder base.”

Hutcheson on Metro's rollout problems: “ … We have concerns about your ability to successfully grow your business in line with shareholder expectations. Specifically, we believe that much of your near-term performance will depend on your market launches in Los Angeles and New York City. In Los Angeles, we understand that you have experienced delays and may be launching service under the license you won 30 months ago with a near-term footprint different than you had originally intended.”

Metro's response: “MetroPCS notes that within the past two months, representatives of MetroPCS held discussions, including an in-person meeting, with representatives of Leap, including Leap's chairman of the board, to discuss merger prospects. Those talks did not lead to further substantive discussions given Leap's highly unrealistic valuation expectations.”

Hutcheson on Metro's timing: “Our team has repeatedly tried to engage in discussions with you in the past regarding merger possibilities as well as other possible strategic collaborations. … All of our varied and numerous efforts were to no avail. Therefore, given our broad and repeated efforts, we were surprised by your sudden offer and the fact that you decided to make the offer publicly before even attempting to enter into substantive discussions with us. We can only conclude that you recognize Leap's compelling long-term growth prospects, and that your aggressive approach is intended to try to opportunistically capture a disproportionate share of this value for your shareholders prior to an increase in our relative valuation.”

Metro statement in response: “It should be noted that the incremental economic opportunity MetroPCS will enjoy in Los Angeles is roughly equivalent to all of Leap's top five existing markets in operation combined, which, based on licensed population, includes Houston, Phoenix, San Diego, Denver and Pittsburgh. In addition, MetroPCS's experience in its other major markets suggests that Los Angeles could be MetroPCS's most successful launch ever.”