MCI takes step away from BT, toward WorldCom, GTE
By Brendan Intindola
NEW YORK, Oct 16 (Reuters) - MCI Communications Corp
threw off the shackles of its fraying merger agreement
with British Telecommunications Plc (BT) , saying
Thursday it will talk with unsolicited suitors WorldCom Inc
and GTE Corp as early as next week.
MCI and BT mutually agreed to release each other from a
clause in their pact that barred merger talks with other
companies, clearing the way for MCI's announcement.
MCI, the second-largest U.S. long-distance phone company,
is now expected to leverage the two very different bids against
each other, possibly pushing the already record-breaking offers
higher still, analysts said.
"MCI will have to evaluate each of these deals. But it will
likely play out the scenario with BT first and let its
shareholders vote on that deal first," said Timothy Horan, a
telecommunications analyst with Smith Barney.
If the shareholders reject the BT deal, then MCI can lay
out the proposals from GTE and WorldCom, he said.
MCI said it would sit down with its suitors immediately
after the company and BT filed documents with U.S. Securities
and Exchange Commission stating they released each other from
the so-called "no shop" clause in their agreement.
BT's stock and cash offer is worth about $36.30 per MCI
share, or a total of about $17 billion for the 80 percent of
MCI it does already own. That values the whole company at $21
billion.
On Oct. 1, the BT offer was topped by WorldCom's surprise
bid of $41.50 per share, or $30 billion, in WorldCom stock. GTE
stepped in late Wednesday with a $28 billion, $40-per-share
cash offer for MCI.
When the WorldCom bid was announced, BT was viewed as
unlikely to counter with a higher offer because last August it
negotiated a sharp reduction in the orginal terms of its MCI
deal. Under pressure from major shareholders, the British
company cut the price it was offering after MCI's unexpected
announcement that the cost of entering local telephone markets
would weigh more heavily on earnings than previously thought.
BT and MCI first announced their merger last November.
MCI -- under the watchful eye of BT -- must now weigh GTE's
all-cash proposal against WorldCom's stock-swap offer.
"BT is a major MCI shareholder and they realize they lost
this thing. They want to be in the most advantageous position
possible," said an arbitrageur who declined to be named. |
