crazy train folks..i think we made a good move exiting out of exodus..short term that is...this is one we doubt will have to buy back in on a pullback..
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.Top Financial News
Mon, 04 Sep 2000, 3:25pm EDT
WorldCom to Buy Intermedia for $39 a Share, Dow Says (Update3)
By Leslie Miller
New York, Sept. 4 (Bloomberg) -- WorldCom Inc. is in the final stages of buying Intermedia Communications Inc. for $3 billion, or $39 a share, in cash and stock, Dow Jones reported, citing unidentified people familiar with the matter.
The No. 2 U.S. long-distance company will also assume more than $3 billion in Intermedia debt, the news service reported. Intermedia has 10 bond issues outstanding with maturity dates ranging from 2006 to 2009, according to Bloomberg data. At least seven of those bonds contain so-called ``change of control'' clauses, so bondholders get repaid early if the company gets sold.
Florida-based Intermedia, whose investment in the Web-hosting company Digex Inc. is worth more than its own market value, rejected a $22-a-share offer by Global Crossing Ltd. on Friday, people familiar with Intermedia's plans said. A third bid by Exodus Communications Inc. for Digex alone was rejected Wednesday, one person said.
WorldCom would enter the fast growing Web services market through the purchase, as revenue from traditional telephone services shrinks. About 31 percent of Europe's 387 million people now use the Internet, and that percentage is forecast to grow to 55 percent by 2003, according to Schroder Salomon Smith Barney. Penetration in the U.S. is higher at 44 percent.
Digex
Buying Intermedia, a telephone company, and its controlling stake in Digex, which services Web sites, would cost less than the subsidiary alone. Intermedia owns more than half of Digex, which has been for sale since July. Intermedia's market value is about $1.2 billion, while the Digex stake is worth about $3.3 billion.
WorldCom's offer doesn't appear to have been approved by Digex's board, Dow Jones said. WorldCom may have to make another bid for Digex's minority shares, which could be expensive with the company's $5.3 billion market capitalization, the newswire said. Intermedia's shares traded in Germany surged 19.10 euros, or 82 percent, to 42.50 euros ($38.29).
WorldCom spokesman Brad Burns couldn't be reached for comment on Monday, but said over the weekend that the company doesn't comment on rumors or speculation. Intermedia spokesman Alan Hill declined to comment. Alice Andors, a Digex spokeswoman, also declined to comment.
Global Crossing spokesman Thomas Goff couldn't be reached to comment Monday, though the company declined to comment over the weekend. Exodus spokeswoman Maureen O'Connell wasn't available to comment.
Friday Meeting
Intermedia rejected the Global Crossing bid at a meeting in New York on Friday, a person familiar with meeting said. Among those present were WorldCom Chief Executive Bernard Ebbers and John Stupka, president of the company's Wireless Solutions unit; Intermedia Chief Executive David Ruberg; and Digex Chief Executive Mark Shull, the person said.
Global Center offered about $22 a share for Intermedia, in a transaction that would have combined GlobalCenter, Intermedia and Digex into a new, publicly traded company that GlobalCenter would have controlled.
In its most recent quarterly filing with the Securities and Exchange Commission, Intermedia had 54.2 million shares outstanding. It had $2.4 billion in long-term debt.
Intermedia said in July that it hired Bear, Stearns & Co. to examine options for Digex. Bear, Stearns also declined to comment.
``Our goals are to simplify our business strategy and better align network assets,'' Robert Manning, Intermedia's chief financial officer, said in a statement at the time.
Different Paths
Intermedia and Digex have followed different paths since Intermedia paid $150 million in cash for Digex in July 1997.
Digex, based in the Washington suburb of Beltsville, Maryland, focused on providing storage for corporate Web sites, monitoring their performance and providing Internet connections. Its client roster includes Ford Motor Co., J.P. Morgan & Co. and Martha Stewart Living Omnimedia Inc.
The 13-year-old Intermedia sold basic phone services to businesses and government agencies and basic Internet connections, while it tangled for customers with BellSouth Corp.
As enthusiasm for Internet-related companies soared, Intermedia sold Digex shares to the public in July 1999 and again in February. The shares rose to as high as $184 on March 10, or 8.5 times the initial sale price. That gave it a market value of about $11.7 billion -- 78 times what Intermedia paid for it.
Intermedia shares slumped after March along with the rout in Internet stocks. They surged 16 percent to 41 5/8 on June 8 after a report that Broadwing Inc., another telecommunications company, was in talks to buy it. Intermedia shares fell when no transaction materialized.
Sales Warning
Intermedia shares extended their slide when the company warned sales this year would be 10 percent to 15 percent below analysts' expectations.
The company blamed difficulty installing some data and Internet products. Intermedia also filed a lawsuit, accusing BellSouth of failing to meet performance commitments and failing to pay $100 million for terminated calls.
As for Digex, its shares jumped 13 percent on Aug. 1 after it raised revenue projections for the rest of the year and 2001.
The company expects about $165 million in sales in 2000, or 10 percent more than an earlier estimate of $150 million and $300 million next year, the company said. Sales totaled $59.8 million in 1999. Second-quarter sales more than tripled, the company said. It's expected to lose $2.25 a share in 2000, and lose $2.47 in 2001, according to First Call/Thomson Financial.
Digex ended the quarter with 673 customers, up 20 percent from last year. New clients included Men's Wearhouse Inc. and Sony Corp. The company's services mesh with WorldCom's ``generation d'' initiative, which focuses on data access and transmission. |
