From The Wall Street Urinal:
(please note the parts i bolded. I called GBLX and USW IR yesterday to try to get some details on the tender offer. They both said they had no details at this time, but USW is expected to file Friday and there should be a press release explaining the details late Friday or Monday.)
The Wall Street Journal -- May 20, 1999
Global Crossing's Stock Plunges 9.1% Over Merger Fears
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By Stephanie N. Mehta and Steven Lipin
Staff Reporters of The Wall Street Journal
Shares of Global Crossing Ltd. slid 9.1% yesterday on continued concerns about its $35.5 billion
merger with local phone company U S West Inc.
Global Crossing stock fell $5.3125 to close at $53.375 in Nasdaq Stock Market trading. The shares
are down some 13% from their closing price on Friday, before the deal was announced.
Some investors and analysts yesterday voiced worries about the strategic fit of the merger, which
would marry Global Crossing's undersea cable operations with U S West's local phone business in
14 mostly rural states.
Paul Wright, a telecom analyst at Loomis Sayles & Co., said his firm owns shares in U S West but
opposes the Global Crossing pact. "There have to be better folks out there" for U S West to partner
with, he said.
The complicated terms of the merger call for U S West shareholders to receive 1.2 shares of Global
Crossing for each U S West share. There is no formal "collar," or price protection, on the deal, but
shareholders are just beginning to realize that the exchange ratio depends on the total number of
Global Crossing shares outstanding.
Here's why: In a separate deal, Global Crossing also is buying phone company Frontier Corp. for
$63 a share in Global Crossing stock. If Global Crossing shares continue to fall, the company will
need to issue more of its shares.
If Global Crossing's shares were to slip to, say, $45 a share, it would need to issue 1.4 shares of
Global Crossing for each Frontier share, bringing the total to 252 million new shares. In that scenario,
Global Crossing would have about 700 million shares outstanding.
But the Global Crossing/U S West combination is supposed to be a merger of equals -- and U S
West has only about 508 million diluted shares outstanding. To address part of the imbalance, the
Denver local phone company plans to purchase some 39 million shares of Global Crossing stock
before the deal closes. Still, continuing the scenario, Global Crossing would have roughly 153 million
more shares than U S West-pushing the exchange ratio up to 1.3 shares of Global Crossing for each
U S West share.
Shares of U S West rebounded yesterday to $54.875, up 56.25 cents, in New York Stock
Exchange composite trading.
U S West shareholders also are concerned that Global Crossing insiders are cashing in on U S
West's offer to tender for the 39 million shares of Global Crossing before the deal closes. Because
Global Crossing shares are largely held by insiders, those individuals and institutions are likely to be
the beneficiaries of U S West's lump-sum purchase, though all shareholders are eligible.
Still, Global Crossing appears to be taking steps to deflate worries about subsequent insider sales.
While there's concern among some Global Crossing investors that insiders will sell in August once the
one-year prohibition on insider sales expires, people familiar with the matter say the lockup will
continue beyond August through at least the closing of the Frontier deal.
To be sure, AT&T Corp.'s shares got hit in the short term after it announced the acquisition of
TeleCommunications Inc. Within months after the deal was announced, investor enthusiasm rose. |
