[METNF To Acquire Rogers Telecom In $1 Billion Transaction]
MetroNet Communications Corp., Canada's first national alternative
local telecommunications provider, announced that it has executed a
definitive agreement to acquire Rogers Telecom, previously known as Rogers
Network Services, in a cash and stock transaction valued at approximately
$1 billion. Rogers Telecom, a leading provider of competitive local
telecommunications services in Canada, is a wholly owned subsidiary of
Rogers Communications Inc.
"This acquisition solidifies MetroNet's position as Canada's preeminent
competitive local exchange carrier (CLEC) and accelerates our business plan
as the only national full service telecommunications provider to business
and government," said D. Craig Young, MetroNet's President and Chief
Executive Officer.
Young also said, "MetroNet's local service focus, seasoned management
team, financial strength and existing SONET networks combined with Rogers
Telecom's robust SONET networks, extensive access to office buildings, and
impressive customer base create a very compelling strategic business
combination. The combined company will have more than 11 important Canadian
cities interconnected to provide local dial tone, data, Internet and long
distance services, primarily over its own facilities, within the next six
months.
"With this acquisition, MetroNet has rapidly accelerated its network
reach and development, further positioning the company to quickly take full
advantage of the CRTC's recent deregulation of local telecommunications.
This allows us to bring new telecommunications product offerings and a
choice in local telephone service providers to more customers even faster
than we had planned."
Edward S. (Ted) Rogers, Rogers Communications' President and Chief
Executive Officer, said, "MetroNet is ideally situated to be Canada's
premier competitive local telecommunications company for businesses by
virtue of its unmatched national footprint and speed to market advantage,
as well as its growth-focused, entrepreneurial culture. The combination of
Rogers Telecom's network assets and customer base with MetroNet's
leadership position as a full service national telecommunications provider
is a powerful one. We are excited about the value creation and growth
opportunities this significant transaction represents for our
shareholders."
With this acquisition, MetroNet adds over 3,100 additional intracity
route kilometers of fibre and almost 1,200 on-net buildings to its existing
networks. While the transaction is expected to add approximately $350
million of telecommunications plant and equipment to MetroNet's balance
sheet, Young said that MetroNet believes it would cost more than $500
million to replace these network assets which Rogers Telecom has developed
over the past nine years. The purchase price in this transaction is
estimated to represent approximately three times gross plant and equipment
and two times replacement value of the plant and equipment being acquired.
This acquisition will accelerate MetroNet's already formidable speed to
market advantage in Toronto, Vancouver, and Ottawa-Hull, three of Canada's
largest and most strategic market clusters, and the key centres of London,
Kitchener and Waterloo, three high-growth markets where MetroNet had
planned to develop facilities over the next year.
The acquisition will increase MetroNet's revenue base significantly and
is expected to positively impact both EBITDA and shareholder value
immediately. By virtue of Rogers Telecom's network footprint, MetroNet
believes that the portion of its markets directly serviceable by its own
facilities will increase significantly from its previous plans, further
solidifying its first mover advantage. MetroNet also expects the
acquisition to decrease network operating costs due to synergies between
the two companies' networks, both of which are configured in SONET
compatible ring architectures. In addition, MetroNet will assume strategic
commercial relationships upon closing which it expects will greatly benefit
its existing network operations.
By combining the two companies' existing and planned on-net buildings,
MetroNet expects that the buildings accessed by its network by the end of
1999 will be in excess of 125% greater than its earlier plans. As expansion
of the networks continues over the next nine years, MetroNet expects that
the combination of the two companies will enable it to connect to
approximately 50% more buildings to its network than it had previously
anticipated. As more buildings are accessed directly by MetroNet's network,
its operating margins are expected to expand and its reliance on the
incumbent local exchange providers is expected to decrease.
In developing its business plan for the combined company, MetroNet
believes it can realize revenue levels in the tenth year of its planning
horizon which are in excess of 75% greater than its earlier plans, and
that, combined with operating synergies, its EBITDA levels are expected to
increase by over 100%.
As part of the terms of the transaction, Rogers Communications Inc. will
not compete with MetroNet in business and government local exchange service
markets in Rogers' existing franchise areas for a period of four years.
Under the terms of the agreement, Rogers Communications Inc., Rogers
Telecom's parent, will receive 12.5 million shares of MetroNet Class B Non
Voting Common Stock and $600 million in cash. As of Tuesday's market close,
the total value of the transaction would be approximately $1 billion. The
definitive agreement has been unanimously approved by the Board of
Directors of each company. The company will do business as MetroNet
Communications.
In addition to unanimously approving the transaction, Rogers
Communications Inc.'s Board of Directors has agreed not to solicit or take
other actions with respect to any competing proposal. Each company has also
agreed to pay the other a break-up fee of $30 million if, under specified
conditions, either company terminates the agreement.
MetroNet intends to fund the cash portion of the transaction with a
combination of current cash reserves and debt financing. Financing
alternative evaluated, and depending upon market conditions, will be
announced and executed at a later date.
The transaction will be treated for accounting purposes as a purchase
and is subject to regulatory approvals, required consents and other
customary closing conditions. The parties expect that the transaction will
be consummated on or before June 30, 1998.
MetroNet Communications Corp.: Built for Business(TM), MetroNet
Communications is Canada's first national provider of local
telecommunications services and the country's largest competitive local
exchange carrier (CLEC). Deploying the most advanced fibre-optic networking
and switching platforms, MetroNet offers business and government customers
across the country a full suite of voice and data services - with one point
of contact, exceptional customer service and competitive pricing. MetroNet
has operations established in Vancouver, Calgary, Edmonton, Winnipeg,
Toronto, Ottawa-Hull and Montreal and has plans to establish operations in
four additional cities during 1998. MetroNet is a public company with its
common stock traded on the Toronto and Montreal stock exchanges under the
symbol MNC.B and on the NASDAQ National Market System under the symbol
METNF.
Rogers Telecom Inc.: One of Canada's leading providers of
telecommunications services has been providing local high speed data
transmission, private line voice, image, broadcast video and audio
communications to Canadian businesses since 1989. Rogers Telecom, formally
know as Rogers Network Services, is a wholly owned subsidiary of Rogers
Communications Inc.
Rogers Communications Inc.: Canada's national communications company
engaged in cellular and Digital PCS communications through its 81% owned
subsidiary Rogers Cantel Mobile Communications Inc., in cable television
and video retailing through its wholly-owned subsidiary Rogers Cablesystems
Limited, in local telecommunications through its wholly-owned subsidiary
Rogers Telecom Inc., and in radio and television broadcasting, publishing
and new media businesses through its wholly-owned subsidiary Rogers Media
Inc.
Forward Looking Statements: This press release contains statements about
expected future events and financial results that are forward-looking in
nature and subject to risks and uncertainties, including satisfaction of
the conditions to the transaction and the successful integration of
MetroNet Communications and Rogers Telecom. For those statements, we claim
the protection of the safe harbor for forward-looking statements provisions
contained in the Private Securities Litigation Reform Act of 1995.
Discussion of additional factors that may affect future results is
contained in both MetroNet Communications' and Rogers Communications Inc.'s
recent filings with the Securities and Exchange Commission.
Acquisition of Rogers Telecom by MetroNet Communications
Summary of Combined Company
Combined Company Name: MetroNet Communications Corp.
At expected closing, the combined company will have estimated:
1998 Revenues: Over $70 million.
Gross Property, Plant and Equipment: Approximately $600 million.
Total Employees: More than 800.
Buildings Accessed: Over 1,350.
Fibre Optic Route Kilometers: More than 3,400.
Primary Markets: Vancouver, Calgary, Edmonton, Winnipeg, London,
Kitchener, Waterloo, Hamilton, Toronto, Ottawa, Hull, Montreal, and
Quebec City.
Customer Base: While the combined company will serve customers from a
broad section of the business and government sectors, its customer base
will be heavily represented by:
- Broadcast Industry
- The Federal and Municipal Governments
- Financial Institutions
- Internet Service Providers
- Long Distance Telecommunications Providers
- Oil and Gas Exploration and Services
- Wireless Telecommunications Providers
Acquisition of Rogers Telecom by MetroNet Communications
Summary of Significant Terms
Please note: This summary is qualified in its entirety by the
definitive agreement executed by the parties that will be filed shortly
with the Security and Exchange Commission and which includes a complete
description of the transaction.
Purchase Price: Approximately $1 billion.
Consideration: Combination of cash and common stock.
Cash: $600 million (payable $400 million at closing and $200 million on
or before August 15, 1998).
Stock: 12.5 million shares MetroNet Communications Corp. Class B
Non-Voting subject to specified lock-up provisions.
Stock Price Collar: None.
Board Approval: Has been unanimously approved by both boards.
MetroNet Board Composition: Two of eleven seats represented by Rogers
Communications Inc.
Non-Compete Provision: Rogers Communications, excluding Rogers Cantel
Mobile Communications, will not compete in its existing franchise areas
with MetroNet Communications in business and government local exchange
service markets for a period of four years. During this period, Rogers
Communications will enter into wholesale arrangements with MetroNet
Communications on mutually agreeable terms for local dial tone services
for certain of Rogers Communications' other customers.
Conditions: The transaction is subject to regulatory approvals,
required consents, no material adverse changes in either company's
business, and other customary closing conditions.
Termination Conditions: $30 million bilateral breakup fee, as well as
certain expenses, paid by the party failing to complete the transaction
under specified conditions.
Closing: Expected on or before June 30, 1998.
For additional information on MetroNet Communications
Media: Investors and Analysts:
Drew Van Parys Bruce M. Mann
Director, Marketing Communication Vice President, Investor Relations
MetroNet Communications Metro Net Communications
(416) 941-8671 (403) 213-0890
drewvanparys@metronet.ca brucemann@metronet.ca
Mia Pearson Web Site:
Highroad Communications metronet.ca
(416) 368-8348 ext.222
mpearson@highrd.com
For additional information on Rogers Communications
Media: Investors and Analysts:
Jan Innes David A. Robinson
Vice President, Communications Vice President, Investor Relations
Rogers Communications Rogers Communications
(416) 864-2326 (416) 864-2369
jinnes@rci.rogers.com drobinso@rci.rogers.com
Web Site:
rogers.com
TEL: (416) 941-8671 Drew Van Parys, MetroNet Communications
TEL: (416) 368-8348 ext.222 Mia Pearson, High Road Communications
TEL: (403) 213-0890 Bruce M. Mann, MetroNet Communications
TEL: (416) 864-2326 Jan Innes, Rogers Communications
TEL: (416) 864-2369 David A. Robinson
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