Leap Wireless International Inc. (Nasdaq: LEAP) gained the most in five months after an analyst said there's a 70 percent chance MetroPCS Communications Inc. (NYSE: PCS) and T-Mobile USA will bid for it after completing their merger.
Leap advanced 9.6 percent to $6.88 at the close, for the biggest gain since Aug. 10. Shing Yin, a Guggenheim Securities analyst, said such a deal would "make sense." The San Diego-based pay-as-you-go wireless carrier's shares dropped 28 percent in 2012 for the sixth-consecutive year of declines.
Leap rallied 5.5 percent on Nov. 19 on a report that it held talks with MetroPCS about a three-way deal with Deutsche Telekom AG's T-Mobile division. MetroPCS had disclosed in a Nov. 16 filing that it previously discussed a deal with a third party. T-Mobile and MetroPCS said in October that they planned to merge.
"Leap's complementary spectrum assets, the potential for significant synergies and a straightforward integration process that likely would not disrupt initiatives already under way," Yin wrote in a client note Thursday.
Aside from MetroPCS's proxy statement, "T-Mobile CEO John Legere has said that a transaction with Leap could make 'extreme sense,'" Yin wrote.
T-Mobile and MetroPCS could pay as much as $9 to $10 a share after they complete their deal, which is expected to close some time in the first quarter, wrote Yin, who rates Leaps shares as a buy.
He raised his price target for Leap to $8.50 from $7. MetroPCS advanced 3.6 percent to $9.73 in New York. Deutsche Telekom fell less than 1 percent to 9.13 euros in Frankfurt.