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Leap Wireless shares double as AT&T agrees to $1.2 billion acquisition

Friday, 12 Jul 2013 | 5:03 PM ET
Source: LeapWireless

As part of an effort to expand into the market for inexpensive cell phone service, AT&T has agreed to buy prepaid-wireless company Leap Wireless for $15 per share in cash, or just under $1.2 billion.

It's a generous 88 percent premium to Leap's closing price, but it may not be enough to close the deal.

Leap shares more than doubled in after-hours trading, hitting $16.80 per share almost an hour after the announcement.

That's about 11 percent above AT&T's purchase price, indicating investors believe another bidder may emerge with a higher offer.

Pros: AT&T, Leap deal could face issues
AT&T's plans to buy Leap Wireless for $15 a share in cash is likely to face tough scrutiny, professional traders said Friday.

At the close, Leap's stock had already surged 37 percent from its July 24 price of $5.83.

The company has been the subject of takeover speculation for several years.

John Paulson's investment firm holds a large stake: 7.8 million shares, about 10 percent of the shares outstanding.

Headquartered in San Diego, Leap has approximately 5 million subscribers in 35 U.S. states. It also had $2.8 billion of net debt as of April 15, 2013.AT&T plans to retain Leap's "Cricket" brand name and expand its presence in the U.S. Leap operates a 3G CDMA network and a 4G LTE network covering 21 million people. After the deal closes, AT&T said it plans to use Leap's spectrum to help develop its 4G LTE network.

In its news release, AT&T said, the resulting company will provide "increased competition, better device choices, improved customer care and a significantly enhanced mobile Internet experience for consumers seeking low-cost prepaid wireless plans."

The deal is the latest in a series of acquisitions in the wireless industry and follows Softbank's acquisition of Sprint.

As the No. 2 wireless provider in the United States, AT&T has been looking to grow in a mature market. It had held talks to buy Leap last year, Reuters reported.

The acquisition is subject to review by the FCC and Justice Department. AT&T expects to close the transaction in six to nine months.

Reuters contributed to this story

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