By Alexandra Burlacu | Oct 16, 2012 10:01 AM EDT
With the news of the T-Mobile USA and MetroPCS merger still fresh, MetroPCS shareholders have filed suit in an attempt to block the deal.
The shareholders filed the lawsuit in Dallas, Texas, against MetroPCS, T-Mobile USA, its parent company Deutsche Telekom, and MetroPCS' CEO and board of directors.
According to TMONews, MetroPCS shareholders argued the deal was "drastically undervalued," and MetroPCS' board is "conflicted and serving its own financial interests."
"The process leading to the proposed acquisition was tainted by conflicts, tilted towards T-Mobile and driven entirely by the board and company management, who together control 15.4 percent of PCS' outstanding stock and seek liquidity for their illiquid holdings," reads the shareholder complaint.
Deutsche Telekom struck a deal with MetroPCS less than two weeks ago, and its Chief Financial Officer Timotheus Hoettges recently said the company expects to close the deal by the end of the second quarter of 2013. Under the terms of the deal, MetroPCS shareholders would get $1.5 billion in cash and a 26 percent stake in the combined company, while Deutsche Telekom would own the remaining 74 percent. The merger deal still awaits regulatory approval from the Federal Communications Commission (FCC) and the U.S. department of Justice (DOJ).
"PCS' officers and directors will receive millions of dollars in special payments - not being made to ordinary shareholders - for currently unvested stock options, performance units and restricted shares, all of which shall, upon the merger's closing, become fully vested and exercisable," adds the complaint.
Meanwhile, T-Mobile CEO John Legere insisted that the merger was about gaining more spectrum in an increasingly competitive industry, in a bid to challenge larger competitors such as AT&T and Verizon Wireless. During a press conference call when the deal was announced, Legere said the merger aims to drive growth, not just help the company survive.
According to TMONews, MetroPCS shareholders are now seeking injunctive and declaratory relief for derivative and class claims of the companies' alleged abuse of control, breach of fiduciary duty, gross mismanagement, corporate waste, and unjust enrichment.
A hearing is yet to be set. T-Mobile, Deutsche Telekom, and MetroPCS have not offered any official response so far in regards to the claims presented in the lawsuit.
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