Issued 6:35 am EST August 21, l998-
STAR TELECOM RENEGOTIATES ACQUISITION OF
PT-1 COMMUNICATIONS, INC.
Revised agreement reduces purchase price, changes accounting treatment
and secures distributor relationships.
Santa Barbara, CA - August 21, 1998 - STAR Telecommunications, Inc. (Nasdaq:
STRX) today announced that it has renegotiated the terms of its proposed
acquisition of PT-1 Communications, Inc. The acquisition price will be reduced and
the transaction is now subject to purchase accounting treatment. Although pooling is
allowed in some instances of treasury stock transactions of this nature within two
prior years, pooling was rejected by the SEC due to a PT-1 treasury stock purchase of
a founding partner's PT-1 ownership interest in 1997. In conjunction with these and
other changes, the acquisition will proceed under revised terms, subject to final
shareholder, regulatory and anti-trust approvals, and is now expected to close early in
the fourth quarter of 1998.
Under the renegotiated terms of the agreement, the acquisition will be completed
through the issuance of 15 million shares of STAR common stock and the payment
of $20 million to the PT-1 stockholders. Kelly Enos, STAR's Chief Financial Officer,
commented, "The reduction in shares from the original purchase price will offset the
annual goodwill expense. The acquisition will still be accretive to STAR."
Taking into account market conditions at closing and multi-year lock up restrictions
and liquidity discounts related to the shares of STAR common stock issued in the
transaction, the revised merger price is estimated to have a fair market value of
approximately $195 million. This places the current value of the acquisition at
approximately less than half of PT-1's annualized revenue at the current run rate.
In addition, STAR will allocate a combination of common stock and options on
four-year vesting schedule to selected distributors and employees of PT-1. "The
change to purchase accounting enables us to secure long-term relationships with
distributors and key employees through stock incentives which would have been
prohibited under pooling rules," said Mr. Edgecomb. "Combined, the two companies
have a 1998 revenue run rate in excess of $1 billion, which is by far the largest
company in our sector. Management has begun the integration process, which is
currently ahead of schedule. Our department managers have been working on-site
on the east and west coasts to ensure continued progress as we approach the closing
of the merger. As we move closer to completion of this transaction, there are
tremendous opportunities both domestically and internationally for the combined
company."
STAR Telecommunications is a multinational long-distance provider offering
switched-voice services to long-distance carriers and commercial customers
throughout the world. STAR provides international long distance service through a
global network of digital switching facilities and undersea fiber optic cable systems.
STAR Telecom holds domestic switching facilities in New York, Los Angeles, Dallas
and Miami, and international switching facilities in London, Frankfurt, Hamburg,
Dusseldorf and Munich. Visit STAR Telecom at www.startel.com.
Except for the historical information contained herein, this press release contains
forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the safe harbors created thereby. The Company's future
actual results could differ materially from the forward-looking statements discussed
herein. A list of the factors that could cause actual results to differ materially can be
found in the documents the Company files with the SEC, including those contained
in STAR's prospectus, and the Form 10-K for the year ended December 31, 1997.
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