John Paulson, the billionaire hedge-fund manager whose firm is the largest outside investor in T-Mobile US Inc. (TMUS:US), said the company is a likely takeover target for Dish Network Corp. (DISH:US) or Sprint Corp. (S:US)
Paulson & Co., whose biggest fund specializes in buying shares of companies undergoing mergers, became a 2.3 percent stakeholder in T-Mobile US when the mobile-phone company merged with MetroPCS in May. The $17 billion fund firm, which had bought shares of MetroPCS before the merger, plans to hold the stake in the new company in anticipation of further consolidation in the industry, Paulson & Co. said in a letter to clients, a copy of which was obtained by Bloomberg News.
“While the merger closed, we continue to hold the stock as we believe that T-Mobile remains a potential takeover target for either Dish or Sprint,” the firm, which is based in New York, said in the letter.
Takeovers of telecommunications companies have heated up this year as small U.S. carriers look to team up with larger companies. AT&T Inc.’s agreement to buy Leap Wireless International Inc. for $1.2 billion, announced this month, adds pressure on smaller competitors such as Sprint and Dish to bulk up through mergers and acquisitions of their own.
Satellite-TV company Dish dropped a takeover attempt of Sprint in June after a boosted offer from rival bidder SoftBank Corp., which earlier this month completed its acquisition. Sprint bought wireless-network partner Clearwire Corp. this month.
Paulson & Co. is also the third-largest shareholder of Leap Wireless (LEAP:US) and was the second-largest investor in Sprint before the takeover by SoftBank.
T-Mobile US, the fourth-biggest U.S. wireless company, has climbed about 50 percent since buying MetroPCS on May 1, giving it a market value of $17.8 billion.
Armel Leslie, a spokesman for Paulson & Co. with Walek & Associates, declined to comment on the letter.
Time Warner Cable Inc. and Cablevision Systems Corp. may also be acquisition targets, as billionaire John Malone is exploring scenarios for Charter Communications Inc., Paulson said today at the CNBC Institutional Investor Delivering Alpha Conference in New York. Malone’s Liberty Media Corp. owns about 27 percent of Charter, according to data compiled by Bloomberg.
Paulson, who has done well investing in companies undergoing mergers or restructurings, a strategy where he got his start as a trader, posted gains this year on investments in Sprint and Life Technologies Corp., after Thermo Fisher Scientific Inc. agreed to buy the company. The already “healthy” environment for mergers and acquisitions should improve further, he said today at the conference.
Paulson has been hurt by losses tied to bullion after his PFR Gold Fund fell 23 percent last month, bringing its 2013 decline to 65 percent, according to a July 3 letter to investors.
Bullion dropped 12 percent in June, the most since October 2008, after Federal Reserve Chairman Ben S. Bernanke said the central bank may start reducing bond purchases that have fueled gains in financial markets globally.
Paulson & Co. reduced its allocation to gold miners in its event-driven Advantage Funds to about 12 percent, according to the letter, even as it has reiterated its commitment to investing in gold and stocks of the metal’s producers for protection against currency debasement as central banks pump money into the global economy. As recently as the beginning of last year, bullion-related equities accounted for about one-quarter of the Advantage funds’ gross exposure.
“While we sustained significant drawdowns from the gold event portfolio, the sector now accounts for a smaller percentage of the Advantage portfolio and we believe offers more upside than downside at current trough valuations,” the firm told clients.
Paulson, who made $15 billion for his investors in 2007 by betting against subprime mortgages before the housing collapse, said the recovery should continue for the next four to seven years. His firm’s real estate strategy has bought 30,000 entitled lots in Arizona, Nevada, Florida, Colorado and California, he said at today’s conference. Mortgage-backed securities also comprise a large portion of his credit funds’ assets, he said.
Paulson, 57, said he expects he will manage money for the next 20 years.
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