The proposed merger between T-Mobile and MetroPCS is facing challenges from shareholders who are unhappy with the deal between the two companies.
The shareholders are pursuing two derivative complaints, which means that they are basing their injury on the injury that the merger is causing to the two companies. Shareholder derivative suits are brought by the shareholder on behalf of the company itself in situation in which the shareholder believes a principle in the company is acting against the company's best interest.
In this case, the litigation is over whether T-Mobile and MetroPCS shares have been undervalued for purposes of the merger, causing harm to the corporations and their shareholders. Part of the problem is that the merger will result in a reverse stock split for MetroPCS shareholders, meaning that two shares will become one, and the company will pay shareholders a certain amount of money for the transition. That amount is currently a little over four dollars, which shareholders say is intentionally undervalued. Another issue is that MetroPCS shareholders believe that the deal was crafted so that it would not be appealing to any other buyer except for T-Mobile, even though it was allegedly an open bidding process.
The shareholders are seeking an injunction, which means that they want to put the merger on hold or stop it completely.
This type of litigation is unfortunately not uncommon for mergers or acquisitions involving large, publicly held companies. It can be difficult for shareholders, executives, and the directors of a company to agree on the right direction for the company.
Source: Courthouse News Service, "Shareholders Fight Metro PCS T-Mobile Merger," David Lee, Oct. 12, 2012.