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Update: T-Mobile closes Sprint merger without final Calif. regulator approval

T-Mobile US Inc. and Sprint Corp. have completed their merger, consolidating the third- and fourth-largest U.S. wireless carriers, T-Mobile said April 1.

The company said in a news release that it expects the deal to result in at least $43 billion in synergies for shareholders. It noted that the vast majority of synergies in this deal will come from combining networks, through moves such as reducing redundant cell sites and deploying spectrum and other technologies more efficiently.

Under the terms of the transaction, Sprint shareholders will receive a fixed exchange ratio of 0.10256 T-Mobile share for each Sprint share, or the equivalent of approximately 9.75 Sprint shares for each T-Mobile share. As previously announced, Sprint's former parent, SoftBank Group Corp., surrendered approximately 48.8 million T-Mobile shares acquired in the merger to New T-Mobile immediately following the closing of the transaction, making SoftBank's effective ratio 11.31 Sprint shares per T-Mobile share.

Shares in the new T-Mobile will trade on the Nasdaq beginning April 1 under the ticker symbol TMUS. Sprint shares will no longer trade on the New York Stock Exchange.

The closing comes amid the coronavirus pandemic. T-Mobile said in a separate April 1 filing that it closed 80% of its stores as of March 17, but plans to potentially reopen some throughout the month of April, depending on healthy operating environments and local and state mandates.

Alluding to the pandemic, T-Mobile CEO Mike Sievert said in the news release, "During this extraordinary time, it has become abundantly clear how vital a strong and reliable network is to the world we live in."

Effective April 1, Sievert assumed the role of CEO. Sievert was serving as president before the merger. Former CEO John Legere will continue as a member of the board of directors for the remainder of his current term, through June 2020.

Notably, the companies will begin integration without having approval from the California Public Utilities Commission, which legal experts have said is required for integration in the state. The California PUC recently proposed conditional approval of the deal, which could be approved by the full commission as early as April 16.

On March 30, the companies filed a motion to withdraw the wireline elements of their merger proceeding before the commission. The companies still have a wireless proceeding pending before the commission; however, Sievert said in a March 31 letter to the CPUC said T-Mobile has an "abiding view" that the CPUC lacks jurisdiction over the transaction and took issue with the terms of the CPUC's proposed decision.

The proposed decision, he wrote, contains "a number of obligations that in addition to exceeding the CPUC's jurisdiction are not supported by the record, are practically impossible, are unfair and discriminatory to T-Mobile vs our competitors."

Therefore, Sievert ultimately urged the commission to revise its proposed decision and to vote on it at the commission’s April 16 meeting.

In a cautionary statement issued as part of the announcement, T-Mobile warned that one factor that could cause plans and results to change is the possibility for litigation or actions to arise from the consummation of the business combination amid the CPUC's review.

Sievert also said in the letter that the COVID-19 outbreak has "created unprecedented uncertainty and risk in the financial markets, including the debt markets that are critical for us to secure the required financing for the merger and our 5G network build-out."

Specifically, he said the market for investment-grade long-term debt financing has witnessed "unprecedented upheaval" in recent weeks and that the company is now forced to rely on short-term bridge financing from a group of lenders under an existing commitment.

He also noted that the company is "fortunate that the banks are still prepared to provide bridge financing for an April 1 close," because of all the ongoing turmoil in the financial markets.

Sievert also said if the company did not close the transaction on April 1, it is conceivable that it may never be able to do so.

In addition to final approval from the California PUC, T-Mobile had previously been waiting on a judge to sign off on the U.S. Department of Justice's conditional approval of the deal, which included a settlement. On April 1, a judge from the U.S. District Court for the District of Columbia ruled the settlement was in the public interest.

PJT Partners and Goldman Sachs acted as financial advisers to T-Mobile. Wachtell Lipton Rosen & Katz provided legal counsel to T-Mobile and Deutsche Telekom. Evercore acted as financial adviser to the committee of independent directors of T-Mobile and Latham & Watkins provided legal counsel to the committee of independent directors. Morgan Stanley served as a financial adviser to Deutsche Telekom.

The Raine Group LLC acted as lead financial adviser to Sprint. J.P. Morgan also acted as a financial adviser to Sprint. Morrison & Foerster LLP provided legal counsel to Sprint and SoftBank.