Why Leap Wireless Shares Leapt Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Leap Wireless (NASDAQ: LEAP  ) have leapt higher today by more than double, up by 116% at the high, following news that AT&T (NYSE: T  ) has agreed to acquire the pre-paid carrier.

So what: Ma Bell has offered $15 per share in cash, valuing Leap at $1.2 billion. In addition, Leap shareholders will receive the net proceeds from the sale of spectrum in Chicago, which Leap purchased last year for $204 million. That partially explains why shares traded as high as $17.25 this morning.

Now what: The proposed merger will bolster AT&T's spectrum position, although it will also attract regulatory scrutiny for the same reason. AT&T will also acquire Leap's customer base of approximately 5 million prepaid subscribers, strengthening its numbers in that market segment. The transaction will face the usual hurdles of shareholder votes, regulatory approvals, and other customer closing conditions, but AT&T hopes to seal the deal within six to nine months.

Interested in more info on Leap Wireless? Add it to your watchlist by clicking here.

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