Glass Lewis & Co. announced on Friday its opposition to the merger of MetroPCS Communications (NYSE:PCS) and Deutsche Telekom unit T-Mobile USA, putting more pressure on the carrier’s parent to sweeten the deal.
Glass Lewis joined ISS and funds such as Paulson & Co. and P. Schoenfeld Asset Management that have voiced opposition to the deal, which would give MetroPCS shareholders a 26% stake in the combined company and about $4 a share in cash following the merger.
Opponents, including Glass Lewis, have argued that Deutsche Telekom is undervaluing MetroPCS with its offer and shareholders should receive a bigger stake. Deutsche Telekom also has been accused of loading up the combined company with too much debt.
A MetroPCS spokesperson told FOX Business that the board “remains committed” to the proposed merger with T-Mobile, which it believes “is in the best interests of MetroPCS and all MetroPCS stockholders.”
“MetroPCS’ board strongly believes the economic terms of the combination are extremely compelling for MetroPCS stockholders,” the spokesperson said.
With just two weeks to go before a vote by MetroPCS shareholders—the final hurdle for the merger—the wireless carrier has hit several bumps in the road.
Earlier this week, proxy adviser Institutional Shareholder Services said it believes shareholders should vote against the deal. Then a group of shareholders filed a lawsuit on Thursday, seeking either an injunction to stop the April 12 vote or damages in the event the merger is finalized.
The company said on Thursday another independent advisory firm, Egan-Jones, believes shareholders should support the combination with T-Mobile. It added that the merger would create a stronger combined company and would “extend the MetroPCS brand into unserved and underserved major metro areas.”
A company spokesperson told FOX Business that “MetroPCS intends to vigorously defend itself” against the lawsuit filed late Thursday in a Manhattan federal court.
Deutsche Telekom has tried for more than a year to change its footing in the U.S. market, where T-Mobile is fourth in market share.
It first tried to sell T-Mobile to AT&T (NYSE:T) for $39 billion, but the U.S. Department of Justice struck down the deal.
The proposed merger with MetroPCS would give T-Mobile extra spectrum rights and the ability to improve service, while a publicly traded stock would allow Deutsche Telekom some flexibility if decides to sell some of its stake or raise capital.
Shares of MetroPCS closed at $10.90 on Thursday. The stock is down nearly 20% since its peak in October when news of the merger agreement surfaced.