Full details of takeover....Global Crossing to Buy Racal Fiber Network for $1.65
Billion in Cash, Debt
By Sonja Heizmann
Global Crossing to Buy Racal Telecom for 1 Bln Pnds (Update1)
(Adds details of transaction, in 6th paragraph.)
London, Oct. 11 (Bloomberg) -- Global Crossing Ltd., which
is building a worldwide phone and data network, agreed to buy
Racal Electronics Plc's U.K. fiber network for 1 billion pounds
($1.65 billion) in cash and debt, topping an offer from Energis
Plc, Britain's largest carrier of Internet traffic.
Global Crossing will pay 950 million pounds in cash, of
which 200 million will be used to repay debt. Another 50 million
pounds will be for leases. Racal plans to return 500 million
pounds from the sale to shareholders.
Racal's 4,500-mile network would give Global Crossing, which
got its start two years ago building undersea fiber-optic cables,
a land network in the U.K. to match its U.S. land network. Global
Crossing acquired that U.S. network when it bought No. 5 U.S.
long-distance company Frontier Corp. for $9.3 billion last month.
''Buying Racal tells you that Global Crossing wants to be
independent to make its own alliances and expand its network,''
said Tom Burnett, editor of Merger Insight.
The Racal network, which runs along right-of-way of the
British rail system, also comes with high-volume clients,
including government agencies and U.K. lottery operator Camelot
Group Plc.
Racal said the sale will lead to a 600 million pound gain in
fiscal 2000. The company also sees fiscal 2000 reorganization
charges to be 3 million pounds more than forecast. Racal will
retain its Translink and Fieldforce units.
The U.K.'s Energis Plc was reported by London's Financial
Times to have bid about 790 million pounds in cash and stock.
Energis, a telecommunications company that caters to business
clients, wanted the Racal network to compete with British
Telecommunications Plc and Cable & Wireless Plc.
Investor Attention
The Racal purchase comes amid mounting investor interest in
Global Crossing in the wake of MCI WorldCom Inc.'s $129 billion
offer for Sprint Corp. announced Tuesday.
Global Crossing shares rose 45 percent since that
announcement on speculation that BellSouth Corp. or Deutsche
Telekom AG may try to buy it after losing bids for other
telecommunications companies, analysts said.
BellSouth, which provides local phone services in nine
southeastern U.S. states, was outbid for Sprint by MCI WorldCom
Inc. Deutsche Telekom has been looking to buy companies since
losing a $93.6 billion bid for Telecom Italia SpA in May.
On Friday, Global Crossing's shares rose 4 5/16, or 13
percent, to 36 1/2 in trading of 44.1 million, or about five
times the three-month daily average, making it the second most
actively traded stock in U.S. markets. Racal fell 0.75 British
pence to 450. Energis rose 21 pence to 1792.
Alcatel Agreement
The same day, Alcatel SA, Europe's second-largest phone-
equipment maker, said it will help run Global Crossing Ltd.'s
communications network in Europe, aiding Global's drive to
complete its worldwide network. The contract is estimated to be
valued at more than $100 million over several years, a person
familiar with the agreement said.
Last week, Global Crossing Vice Chairman Joseph Clayton said
the company is interested in buying Internet assets that MCI
WorldCom Inc. and Sprint Corp. may have to shed to win regulatory
approval of their planned combination.
Global Crossing recently completed 13,000 miles of its North
American network, formerly known as the Frontier Optronics
network. The last 7,000 miles -- primarily in the southeastern
U.S. -- will be finished by year end, the company said. Thirteen
European cities also will be done by year end. A 1,000-mile
connection from Tokyo to Nagoya to Osaka, Japan will be done by
early next year.
Global Crossing expects its progress in building its
international network to help it compete against the combined MCI
WorldCom-Sprint, which will have about $50 billion in annual
revenue, Clayton said.
In the six months ended June 30, Global Crossing had revenue
of $368 million and Frontier had revenue of $1.32 billion.
The company also intends to build facilities in London,
Amsterdam, Paris and Frankfurt by the end of next June. It will
construct data centers in Asia, with Tokyo and Hong Kong the most
likely sites. |
