The Morning Brief: Paulson Says No to MetroPCS-Deutsche Telekom Merger; Einhorn Drops Apple Lawsuit
John Paulson, whose eponymous firm, Paulson & Co., owns 9.9 percent of wireless telecommunications carrier MetroPCS Communications, said he will vote against the company’s merger with Deutsche Telekom. In a letter sent to the board of directors of both companies, the hedge fund manager said he believes in the strategic merits of the proposed combination, but he believes the merged company will have too much debt at too high an interest rate to be competitive in the well-capitalized U.S. wireless industry. “The highly levered pro forma equity creates disproportionate risk for MetroPCS shareholders, while the majority of the value is extracted by Deutsche Telekom through $15 billion of intercompany debt,” he wrote in the letter. Paulson said MetroPCS is worth more as a standalone company, even as it seeks “opportunities for higher value strategic transactions.” Shares of MetroPCS were flat, closing at $9.81 Friday.
David Einhorn’s Greenlight Capital has dropped its lawsuit against Apple after successfully convincing a judge to issue an injunction last week, preventing Apple from proceeding with a controversial shareholder resolution. Einhorn has been urging the maker of iPhones and iPad to issue a preferred stock that would unlock some of the company’s $137 billion in cash. Apple tried to proceed with a shareholder proposal that would have made Einhorn’s efforts much more difficult. Apple shares fell Friday by 2.48 percent, to $430.47. See related Greenlight Capital story on Alpha.
A British Tax Tribunal disallowed a tax shelter scheme by a London hedge fund manager who sought to prevent paying taxes on $29 million in profits. Patrick Degorce, chief investment officer of hedge fund Theleme Partners, tried to offset losses from buying and selling movie rights using a British Virgin Islands entity against profits from his hedge fund.
Steve Cohen’s SAC Capital Advisors disclosed a 5 percent interest in health food products maker Annie’s. The disclosure was made in a 13G filing, meaning it is intended to be a passive investment.