Notable Mergers and Acquisitions of the Day 10/03: (PCS) (OCN) (CG) (SVU)

• Deutsche Telekom and MetroPCS Communications, Inc. (NYSE: PCS) have signed a definitive agreement to combine T-Mobile USA (“T-Mobile”) and MetroPCS. This transaction will create the leading value carrier in the U.S. wireless marketplace, which will deliver an enhanced customer experience through a wider selection of affordable products and services, deeper network coverage and a clear-cut technology path to one common LTE network. The combined company, which will retain the T-Mobile name, will have the expanded scale, spectrum and financial resources to aggressively compete with the other national U.S. wireless carriers.
  
  Deutsche Telekom’s supervisory board and MetroPCS’ board of directors approved the transaction. The transaction is structured as a recapitalization, in which MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders (approximately $4.09 per share prior to the reverse stock split) and acquire all of T-Mobile’s capital stock by issuing to Deutsche Telekom 74% of MetroPCS’ common stock on a pro forma basis. Deutsche Telekom has also agreed to roll its existing intercompany debt into new $15 billion senior unsecured notes of the combined company, provide the combined company with a $500 million unsecured revolving credit facility and provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions.
  
  The combined company will be a stronger competitor and will be well-positioned to drive future growth. Based on analyst consensus estimates for 2012, the combined company is expected to have approximately 42.5 million subscribers, $24.8 billion of revenue, $6.3 billion of adjusted EBITDA, $4.2 billion of capital expenditures and $2.1 billion of free cash flow (defined as EBITDA less capital expenditures) in 2012.
  
  Upon consummation of the transaction, the combined company is expected to continue trading on the New York Stock Exchange. Mr. Legere, currently President and Chief Executive Officer of T-Mobile, will serve as President and CEO of the new company and J. Braxton Carter, currently Chief Financial Officer and Vice Chairman of MetroPCS, will be the CFO. The company will operate T-Mobile and MetroPCS as separate customer units, led by Jim Alling, currently Chief Operating Officer of T-Mobile, and Thomas Keys, currently President and Chief Operating Officer of MetroPCS, respectively.
  
  After closing, the company’s headquarters will be in Bellevue, Washington and it will retain a significant presence in Dallas, Texas. The combined company will have an 11-member board of directors, including a number of members appointed by Deutsche Telekom consistent with its equity ownership.
  
  The transaction is subject to MetroPCS shareholder approval, regulatory approvals and other customary closing conditions. The transaction is expected to close in the first half of 2013.
  
  Morgan Stanley acted as lead financial advisor and issued a fairness opinion to the supervisory board of Deutsche Telekom. Lazard acted as financial advisor to Deutsche Telekom. Wachtell, Lipton, Rosen & Katz, Cleary Gottlieb Steen & Hamilton LLP, K&L Gates, and Wiley Rein LLP are serving as legal counsel to T-Mobile and Deutsche Telekom.
  
  J.P. Morgan acted as lead financial advisor to MetroPCS and also advised MetroPCS with regard to post transaction capital structure. Credit Suisse Securities (USA) LLC also acted as a financial advisor to MetroPCS. Evercore Partners acted as financial advisor to the special committee of the Board of Directors of MetroPCS and issued a fairness opinion. Gibson, Dunn & Crutcher LLP, Paul Hastings and Telecommunications Law Professionals are serving as legal counsel to MetroPCS. Akin Gump and Fulbright & Jaworski served as counsel to MetroPCS’ special committee.
  
  
• Ocwen Financial Corporation (NYSE: OCN) and private equity firm WL Ross & Co. LLC entered into an agreement today whereby Ocwen will acquire Homeward Residential Holdings, Inc., including its various residential mortgage loan servicing and origination operating subsidiaries, for approximately $588 million in cash and $162 million in Ocwen convertible preferred stock. Homeward services about 422,000 mortgage loans with an aggregate unpaid principal balance of over $77 billion. Its loan origination business includes correspondent and retail lending and is focused solely on high quality Agency-conforming mortgages.
  
  Homeward was organized by WL Ross & Co. in 2007 and is the result of several major platform combinations: American Home Mortgage Servicing, Option One Mortgage Company and a large servicing portfolio from Citi Residential Lending. After normalizing for certain transition related expenses, the acquisition of Homeward by Ocwen is expected to be immediately accretive to earnings per share.
  
  The definitive acquisition documents provide representations, warranties and covenants that are customary for a transaction of this nature, as well as loss sharing provisions relating to certain pre-closing liabilities. Subject to regulatory approvals, the transaction is anticipated to close by year end. Ocwen will not need to raise any additional equity capital to close the transaction.
  
  Joint financial advisors Barclays Capital and Citi Global Markets, Inc. provided Ocwen financial advisory and investment banking services as part of this purchase transaction. Kramer, Levin, Naftalis & Frankel, LLP were Ocwen's legal advisors; WL Ross was represented by Jones Day.
  
  
• The Carlyle Group (Nasdaq: CG) and Vermillion Asset Management (Vermillion) announced that the Carlyle publicly traded partnership has purchased, effective October 1, 2012, a 55% stake in Vermillion, a New York-based commodities investment manager with approximately $2.2 billion of assets under management as of September 30, 2012, which has become affiliated with Carlyle’s Global Market Strategies business.
  
  Vermillion was established in 2005 by Drew Gilbert and Chris Nygaard. Today, Vermillion manages three commodities-focused strategies, including relative value, enhanced index and long-biased physical commodities. Each strategy utilizes Vermillion’s ability to make and take physical delivery, unique among its peer group.
  
  Vermillion will become Carlyle’s exclusive commodities trading platform and Gilbert and Nygaard will continue in their current roles as co-Chief Investment Officers, managing investments and the day-to-day operations of Vermillion.
  
  The Vermillion ownership stake was acquired by Carlyle in exchange for cash, an ownership interest in Carlyle and performance-based contingent payments payable over five and a quarter years. If Vermillion achieves certain performance targets, Carlyle has agreed to issue to the Vermillion principals up to 1,439,788 Carlyle Holdings partnership units over a four and a quarter-year period. These units will be exchangeable one-for-one on a private placement basis for common units of The Carlyle Group L.P. subject to the terms of Carlyle’s exchange agreement. Vermillion’s principals reinvested cash proceeds from the transaction into Vermillion’s funds. The transaction received the requisite fund consents. Further terms of the transaction were not disclosed.
  
  Carlyle’s Global Market Strategies business comprises an array of long/short credit hedge funds, emerging markets equities and macroeconomic strategy hedge funds, structured credit, middle-market credit, energy mezzanine and distressed products – 53 funds with $29 billion in assets managed by 100 investment professionals in New York, Washington, DC, Los Angeles, Houston, Hong Kong and London as of June 30, 2012.
  
  Sandler O’Neill + Partners, L.P. and Katten Muchin Rosenman LLP served as financial and legal advisors to Vermillion, respectively. Simpson Thacher & Bartlett LLP served as legal advisor to Carlyle.
  
  
• After the market closed Tuesday, SUPERVALU Inc. (NYSE: SVU) was said to be attracting interest from billionaire Ron Burkle and private equity firms KKR and TPG Capital.
  
  The interested third parties are looking at parts of SUPERVALU versus the whole company, according to Bloomberg's sources. Cerberus is also said to be interested.

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