from Bloomberg~
Top Financial News
Mon, 04 Oct 1999, 10:37pm EDT
MCI Worldcom to Buy Sprint for About US$76 a Share in Stock, Person Says
By George Stein
Sprint Accepts MCI WorldCom Buyout, Rejects BellSouth (Update2)
(Adds comments from analysts in 4th paragraph, background
from 6th paragraph.)
Westwood, Kansas, October 4 (Bloomberg) -- MCI WorldCom Inc.
beat a $72 billion bid from BellSouth Corp. to acquire Sprint
Corp., giving it a wireless phone network that spans the U.S. and
will help the company compete with AT&T Corp. and other rivals.
Sprint's board approved the MCI WorldCom offer for about $76
a share in stock, surpassing the $72 per share offer from
BellSouth, people familiar with the negotiations said. The No. 3
U.S. long distance company favored the MCI WorldCom offer because
it provided institutional investors with opportunities for growth
that Sprint didn't, analysts said earlier in the day.
``This acquisition really solidifies MCI WorldCom's position
as a dominant competitor in the next century,' said Brian
Adamik, an analyst at the Yankee Group in Boston. ``They are a
major player.'
The vote by the Sprint board came after MCI WorldCom
improved its $65 billion offer to counter an increased bid by
BellSouth Corp., a person said without elaboration.
Together, MCI WorldCom and Sprint control about 30 percent
of the $80 billion-a-year U.S. long-distance phone market and
have more than $35 billion in annual sales. AT&T has about 48
percent of the market.
``BellSouth is still a bridesmaid,' said Tom Burnett,
president of Merger Insight, which tracks mergers and
acquisitions. ``It's a great company with very solid management.
But they aren't a mover and a shaker and not a big influence on
the industry.'
Complete Services
The transaction gives MCI WorldCom, led by Chief Executive
Bernard Ebbers, a nationwide wireless business that will let it
offer a complete range of services sought by many customers and
offered by AT&T. BellSouth may now have to look for another
partner to remain competitive.
``A WorldCom-Sprint combination would be an even more
formidable force for AT&T to contend with in the long distance
business,' said Robert Wilkes, an analyst with Brown Brothers
Harriman. ``That addition of wireless assets is particularly
important as wireless migrates from voice to increasingly data.'
Officials at Sprint and BellSouth declined to comment. MCI
WorldCom representatives weren't immediately available for
comment.
The Sprint vote came at the end of a day of last-ditch
maneuvering after Sprint told BellSouth its bid would fail unless
it boosted the offer, the person said.
Atlanta-based BellSouth, which provides local phone service
in nine southeastern U.S. states, then sweetened its $72 billion
bid for Sprint, boosting a cash bonus for Sprint's wireless unit
to $11 a share, more than MCI WorldCom Inc.'s initial offer,
people familiar with the negotiations said. Terms of MCI
WorldCom's final offer couldn't immediately be determined.
Desperation Offer
The BellSouth offer ``smacks of desperation and getting to
the station and seeing the train pull out,' Burnett said. ``That
will bother people. It implies management was slow to realize
where the market was heading. It makes holders fell BellSouth
will try something else -- some late stage gamble here.'
Some analysts had predicted MCI WorldCom would triumph,
though the combined company may have to divest Sprint's data
network, just as WorldCom was forced to sell an Internet unit to
gain approval of its purchase of MCI Communications Corp. in
1998.
``WorldCom can probably make a cleaner case' for a purchase
of Sprint than BellSouth, said Bern Fleming, portfolio manager at
the American Express Utilities Income Fund, which owns just under
a million shares of MCI WorldCom and BellSouth, as well as
400,000 shares of Sprint PCS, a mobile phone company affiliated
with Sprint.
That's because federal regulations prohibit BellSouth from
offering long-distance service, and the restrictions probably
won't be lifted for some time.
BellSouth Territory
In addition, Sprint has wireless and regular telephone
properties within BellSouth's territory, which generated issues
of divestiture and competition, Fleming said. BellSouth's offer
would have decreased earnings for about two years, a person
familiar with the situation said.
``That wouldn't do BellSouth's stock a whole lot of good,'
said Fleming.
With Sprint, ``MCI WorldCom will give the institutional
investors a very strong growth vehicle,' said Kevin Roe, an
analyst at ABN Amro.
Sprint rose 2 7/8 to 59 7/8 and shares of its PCS wireless
unit gained 3 3/16 to 78 11/16. Sprint PCS's shares have triple
in value this year, making them the third-best performer in the
Standard & Poor's 500 Index.
BellSouth fell 2 11/16 to 42 11/16, while MCI WorldCom rose
1 1/8 to 71 5/8. |
