Pali Says MetroPCS (PCS) Should Offer Leap Wireless (LEAP) 3 Shares, Recommends Pair Trade

Pali Research issued a note suggesting that MetroPCS (NYSE: PCS) should offer and Leap Wireless (Nasdaq: LEAP) should accept a deal to give LEAP shareholders 3.0 shares of PCS for each LEAP share.

The firm said a merger would unlock $2.0 billion of value from the increased strategic positioning of its combined spectrum position as well as the more than $200 million of annual cost synergies that could be achieved.

Pali Research said "investors should establish a paired trade position by shorting MetroPCS shares against a long position in Leap in a ratio of Leap's stock price to that of MetroPCS because we believe it’s reasonable that these companies will merge at a ratio that is at least 20% more than the current ratio of 2.1."

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