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Archives > Transaction Case Study 72
SOKOLOFF & COMPANY CASE STUDY:
DATE ANNOUNCED: July 12, 2013
SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES
Spectrum is the main driver in the industry right now behind the recent wave of consolidation of companies including T-Mobile’s acquisition of MetroPCS and Japan’s SoftBank Corp. takeover of Sprint.
Smart money recognized there was another reason to value the shares above $15. AT&T also agreed to allow Leap to sell its unbuilt 700 MHz A Block Chicago Spectrum which it bought in 2012 for $204 million. The proceeds of this sale will be funneled to current shareholders via a mechanism called a CVR, “Contingent Value Right.” So each selling Leap shareholder gets a CVR along with cash of $15 at closing. Barring the FCC moving quickly to finally release additional spectrum (it won’t), the value of Leap’s Chicago spectrum has probably appreciated. Even without the appreciation, each CVR is worth $2.57 ($204 million divided by 79.19 million shares outstanding). Leap has three years to complete the spectrum sale. In the unlikely event that no sale is concluded the spectrum reverts to AT&T and the CVRs become worthless.
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