Full Story ($42 based in Friday's Qwest close!)
DENVER and MCLEAN, Va.--(BUSINESS WIRE)--March 9, 1998--Qwest
Communications International Inc. and LCI International, Inc. today
announced the signing of a definitive merger agreement. The merger
will create the fourth-largest U.S. long distance company and one of
the fastest growing companies in the communications industry. The
all-stock transaction is valued at approximately $4.4 billion. The
merger enables the LCI nationwide customer base to fully leverage the
capabilities and efficiencies of the Qwest Macro Capacity SM fiber
network and allows Qwest to take full advantage of LCI's sales and
marketing expertise, distribution channels, intelligent network
platform, as well as the company's customer care and billing system.
The combined companies had 1997 revenues of $2.3 billion, serve over
two million business and residential customers and have a total
current equity market capitalization of over $11 billion. (See
attached fact sheet for further detail.)
The board of directors of each company have approved the merger.
The terms of the merger agreement call for each LCI share to be
converted into $42.00 of Qwest common stock, under current market
conditions. Based on the closing prices of Qwest and LCI on March 6,
1998, LCI shareholders would receive approximately 122.4 million
newly issued shares of Qwest stock, or 36.4 percent of the combined
company's shares. The merger is intended to qualify as a tax-free
reorganization and will be accounted for as a purchase.
"Brian Thompson and the LCI team have built a world class
communications company. Combining their customer base and their
highly competitive people with those at Qwest, and their state of the
art billing and customer care platforms with the Qwest network
creates a powerful new company," said Joseph P. Nacchio, president
and CEO of Qwest. "Qwest's ability to sell next generation data
services is greatly enhanced by the LCI sales, marketing and
distribution strengths. This merger accelerates both Qwest's and
LCI's business plans by several years."
The combination of Qwest and LCI will result in significant
operating and financial benefits. The merger will deliver greater
network efficiencies, eliminate duplicate efforts to build sales and
systems infrastructure, avoid duplication of capital spending
programs and accelerate the companies' data and international
strategies.
"LCI has achieved a 40 percent average annual revenue growth rate
over the last 5 years and is one of the most successful and fastest
growing telecommunications carriers in the U.S.," said H. Brian
Thompson, chairman and CEO of LCI. "We anticipate that Qwest's
technologically advanced network will enable us to further accelerate
our performance."
An integration team composed of four senior executives from each
company has been formed to oversee the combination process to ensure
that operational benefits are fully realized. LCI will receive two
seats on Qwest's board of directors, one of which will be filled by
H. Brian Thompson, who will become vice chairman of the board.
Completion of the transaction is anticipated to occur during the
third quarter of 1998. The transaction is subject to the majority
vote of the shareholders of Qwest and LCI and to other customary
conditions such as receipt of regulatory approvals. The majority
shareholder of Qwest has agreed to vote in favor of the transaction.
The actual number of shares of Qwest common stock to be exchanged
for each LCI share will be determined by dividing $42 by a 15-day
volume weighted average of trading prices for Qwest common stock
prior to the closing, but will not be less than 1.0625 shares (if
Qwest's average stock price exceeds $39.53) or more than 1.5583
shares (if Qwest's average stock price is less than $26.95). If
Qwest's average stock price is less than $26.95, LCI may terminate
the merger unless Qwest then agrees to exchange for each share of LCI
the number of Qwest shares determined by dividing $42 by such average
price.
The Qwest Macro Capacity Fiber Network
Qwest's planned domestic 16,285 mile network will serve more than
125 cities, which represent approximately 80% of the data and voice
traffic originating in the United States, upon its scheduled
completion in the second quarter of 1999. Currently, more than 3,600
miles are activated from Los Angeles to Columbus, Ohio. Qwest is
also extending its network 1,400 miles into Mexico with completion
slated for late third quarter 1998.
The Qwest Macro Capacity Fiber network is designed with a highly
reliable and secure bi-directional, line switching OC-192 SONET ring
architecture. Upon completion, the network will offer a self-healing
system that provides the ultimate security and reliability by
allowing instantaneous rerouting in the event of a fiber cut or
equipment failure.
About LCI International
LCI International, Inc. (NYSE:LCI), one of the nation's
fastest-growing long-distance telecommunications carriers, provides a
full array of worldwide voice and data transmission services to
businesses, residential customers and other carriers through its
4,500 mile fiber-optic network which is planned to be 8,500 miles by
the end of the year. LCI International, Inc. is headquartered in
McLean, VA, with offices in more than 60 locations, including
national network control and customer service centers, and regional
operations in various locations throughout the United States.
About Qwest
Qwest Communications International Inc. (NASDAQ:QWST) is a
multimedia communications company building a high-capacity, fiber
optic network for the 21st century. With its cutting-edge
technology, Qwest will deliver high-quality data, video and voice
connectivity securely and reliably to businesses, consumers and other
communications service providers. Further information is available
at www.qwest.net.
Lehman Brothers Inc. acted as financial advisor to LCI and
Salomon Smith Barney acted as financial advisor to Qwest.
This release, including the attached merger fact sheet, may
contain forward-looking statements that involve risks and
uncertainties. These statements may differ materially from actual
future events or results. Readers are referred to the documents
filed by Qwest with the SEC, specifically its most recent reports on
Form 10-Q, which identify important risk factors that could cause
actual results to differ from those contained in the forward-looking
statements, including potential fluctuations in quarterly results,
dependence on new product development, delays in closing the
transaction, inability to achieve combination efficiencies, rapid
technological and market change, failure to complete the network on
schedule, volatility of stock price, financial risk management and
future growth subject to risks.
This announcement is not an offer to sell or a solicitation to buy
any securities of Qwest. The offering with respect to the proposed
merger with LCI will be made only by the proxy statement/prospectus
that will be distributed to stockholders of LCI in connection with
their consideration of the transaction.
Note to Editors: QwestLinked is a trademark, and the Qwest logo is
a registered trademark of Qwest Communications International Inc. in
the U.S. and certain other countries.
*T
Qwest Communications
LCI International
Merger Fact Sheet
Creates fourth largest long-distance company, as measured by revenues.
(assuming Worldcom and MCI merger is consummated.)
Combined market capitalization exceeds $11 billion, at March 6th
trading prices.
More fully utilizes Qwest's 16,000 mile Macro Capacity SM fiber
network.
Combined employee base will be approximately 5,800 (1,800 Qwest and
4,000 LCI).
Combined customer base will be approximately 2.3 million.
Combines the industry's most seasoned and entrepreneurial management
teams.
The combined companies will operate in over 70 U.S. locations (10
Qwest, 60+ LCI), including major operations in Denver, Colorado,
Northern Virginia, Columbus, Ohio and San Antonio, Texas
Qwest's headquarters will remain in Denver, CO.
Operating synergies will be significant in all areas of operations.
Revenues
Network Facility Costs
Sales and Marketing
Network Engineering and Operations
Information Technology
Other Administration and Corporate
Total cost synergies for the first full year post-combination are
estimated to exceed $300 million and exceed $1 billion for 1998
through 2001.
Capital expenditure synergies are estimated to be approximately $80
million in 1999 and exceed $285 million for 1998 through 2001.
Presentation includes forward-looking statements. Actual results
may vary.
Key 1997 Operating Data:
Qwest LCI Combined
Revenues
Communications services $115.3 $1,642.0 $1,757.3
Construction services $581.4 $0.0 $581.4
Total Revenues $696.7 $1,642.0 $2,338.7
Revenue Growth ('97 v. '96) 202% 26%
Ebitda(a) $115.2 $194.0 $309.2
Ebitda Growth(a)
('97 v. '96) 507% 29%
(a) Adjusted for Qwest
Growth Shares
Net Income(b) $14.5 $97.0 $111.5
Net Income Growth(b)
('97 v. '96) 308% 30%
(b) Adjusted for LCI
non-recurring charges
Total Assets $1,390.0 $1,354.0 $2,744.0
Minutes of Use 669.2 12,903.0 13,572.2
Minutes of Use Growth
('97 v. '96) 75% 35%
Post Acquisition Stock Ownership:
36.4% LCI pro forma ownership of combined entity based on March 6,
1998 closing stock price.
*T
CONTACT: Qwest Media Contact:
Alexander Communications
Erin McKelvey,303/615-5070 ext.108
emckelve@alexander-pr.com
or
Qwest Investor Contact:
Qwest Communications
Lee Wolfe, 800/567-7296
lwolfe@qwest.net
qwest.net
or
LCI Media Contact:
LCI International
Gerry Simone,703/848-4478
simoneg@lci.com
lci.com
or
LCI Investor Contact:
LCI International
Kevin Taback, 703/848-4493
tabackk@lci.com
lci.com |
