Everyone seen this yet? Note the dollar figures have been corrected to Canadian in a subsequent press release...
FULL TEXT - AT&T Canada, Metronet to combine
Reuters Story - March 04, 1999 08:54
AT&T Canada Corp and Canadian regional phone company MetroNet Communications Corp
agreed to merge Thursday in a deal valued at about $7 billion.
The new company will be called AT&T Canada Corp, have annual revenues of $1.4 billion and
be 69 percent owned by Metronet shareholders and 31 percent owned by shareholders of AT&T
Corp.
A full text of the press release announcing the deal follows.
-------------------------------------------------------------- AT&T CANADA TO MERGE WITH
METRONET COMMUNICATIONS $7 Billion Transaction Creates Canadian National
Super-Carrier with Local, National and International Reach AT&T Corp. to Own 31% of
Merged Company, MetroNet Shareholders to Own 69%; AT&T Corp. Agrees to Purchase
Remaining Shares of MetroNet
TORONTO, March 4 /CNW-PRN/ - AT&T Canada Corp., one of Canada's leading
telecommunications carriers, and MetroNet Communications Corp., Canada's largest
facilities-based competitive local exchange carrier (CLEC), today announced that they have
executed a definitive agreement to merge the companies in a transaction valued at approximately
$7 billion.
The merger of MetroNet and AT&T Canada will create Canada's premier telecommunications
company, to be called AT&T Canada Corp. The merged company will be the first national,
network-based company to meet all of the telecom needs of Canadian business customers with
one-stop shopping for local and long distance voice, data, Internet and electronic commerce
solutions, as well as wireless services through Cantel AT&T.
Following the merger, AT&T Canada will have combined annualized revenues of approximately
$1.4 billion, more than 4,000 employees, and over $3.5 billion in assets.
The merger combines AT&T Canada's extensive customer base, nation-wide facilities-based
long distance network, powerful brand and global reach with MetroNet's state-of-the-art
telecommunications facilities, data networks and over $900 million of cash to execute its
strategy.
The terms of the agreement outline a multi-stage transaction, which will result in MetroNet
shareholders indirectly owning 69 percent of the merged company and AT&T Corp. indirectly
owning 31 percent. The merged company, which will include ACC TelEnterprises, will market
its services under the AT&T Canada brand.
"The complementary strengths and assets of these companies make the "fit" of this merger perfect
for customers," said Dan Somers, Chairman of AT&T Canada Corp. and Senior Executive Vice
President and Chief Financial Officer of AT&T. "MetroNet customers gain access to AT&T
Canada's established long-distance voice and data network and the vast AT&T global network;
AT&T Canada customers gain access to the country's most modern local service networks."
"This transaction is fantastic for our customers, our shareholders, and Canadian
telecommunications overall," said Craig Young, President and Chief Executive Officer of
MetroNet Communications. "Our customers will immediately have access to not only an
advanced, end-to-end national network for "any distance" and "any bandwidth" service, but to a
global network and services, supported by the world's preeminent name in telecommunications."
"This merger will foster competition in Canada by combining the strengths of two innovators in
competitive Canadian telecommunications and offering customers a wider array of choices
based on the most comprehensive national telecom network in Canada," said Jim Meenan,
President and CEO of AT&T Canada Corp. "It is also a major step forward in realizing our
vision of bringing Canadian customers unparalleled access to the power of a seamless North
American wired and wireless network."
In addition, AT&T Corp. has agreed to purchase, or arrange for another entity to purchase, all of
the shares currently held by MetroNet shareholders for the greater of at least C$75 per share or
the then appraised fair market value. The exact timing will likely be partially dependent upon the
future status of federal foreign ownership regulations. Important terms of the MetroNet share
purchase by AT&T Corp. are outlined below in the Summary of Significant Terms.
Consideration for the MetroNet shares will be paid in the form of cash, AT&T shares, or a
combination thereof, with the number of AT&T shares determined based upon the market price
on or about the time the MetroNet shares are purchased.
The boards of directors of the companies have approved the transaction, which MetroNet
shareholders will be asked to approve at a shareholder meeting expected to be held in May,
1999. If approved by MetroNet shareholders, the merger of the companies is expected to be
completed by the end of the second quarter of 1999.
The combined sales forces of MetroNet Communications and AT&T Canada will provide a full
suite of advanced business telecommunications solutions, offered completely over a state-of-the
art network, from basic local dial tone to global data networking. The combined company will
have not only Canada's preeminent nationwide "any-distance" network capabilities, but also
unrivalled professional expertise through its sales and technical organizations in more than 150
locations across Canada.
The network of the combined company will boast national, high-speed fibre-optic capabilities
with unequalled bandwidth for local and long distance voice, data and Internet services. Backed
by the unparalleled reliability of SONET rings and with more border crossings than any other
telecommunications provider in Canada, the merged company will be able to deliver the finest
global solutions of any telecom company in Canada.
"In addition to the compelling operating and capital expenditure synergies that the transaction
creates, it recognizes tremendous value for MetroNet's shareholders and credit enhancement for
MetroNet's bondholders," said Bob Bicksler, MetroNet's Executive Vice President and Chief
Financial Officer. "Besides guaranteeing MetroNet's shareholders a floor on the value of their
shares, the structure of the transaction also creates the opportunity for our shareholders to
continue participating in the value creation opportunities presented by the newly deregulated
Canadian telecommunications market."
A new Board of Directors for MetroNet with 12 members will be assembled, on which AT&T
Corp. will have 4 seats upon consummation of the transaction.
Jim Meenan will serve as Vice Chairman and Chief Executive Officer of the new company,
Craig Young will serve as Vice Chairman and President, and Bob Bicksler will serve as
Executive Vice President and Chief Financial Officer. Other senior management appointments
will be announced as merger integration planning commences and the new board is assembled.
Merger of AT&T Canada and MetroNet Communications
Summary of Significant Terms
Please note: This summary is qualified in its entirety by the definitive agreements executed by
the parties that will be described more fully in materials to be sent to shareholders in
conjunction with the approval of this transaction.
Enterprise Value of Transaction: Approximately $7 billion.
Contributions to Merged Company: AT&T's 33 percent voting interest in AT&T Canada Corp.
and 100 percent interest in ACC TelEnterprises Ltd., along with the 67 percent interest in the
former AT&T Canada Long Distance Services currently held in trust. All of the assets and
operations of MetroNet Communications.
AT&T Corp. Ownership upon Consummation of Transaction: 31 percent of the non-voting
shares of the merged company and 23 percent of the Class A voting shares of MetroNet
purchased from Providence Equity Partners, a major investor in MetroNet.
MetroNet Share Purchase Terms: If AT&T Corp. does not purchase the outstanding MetroNet
shares before June 30, 2000, the minimum C$75 per share price will increase by 16 percent per
annum compounded quarterly from that date through no later than June 30, 2003. Before June 30,
2003, AT&T Corp. may also designate an alternate purchaser for all MetroNet shares at the
higher of that minimum price and the then appraised fair market value. If by June 30, 2003,
AT&T Corp. has not purchased the outstanding MetroNet shares, those shares would be sold
through an auction process and AT&T Corp. would make whole the shareholders of MetroNet
for the difference between the proceeds received from the auction and the greater of the accreted
minimum price and the appraised fair market value of the shares.
No Shop Provisions: Both companies have agreed not to solicit or take certain other actions with
respect to any competing proposal. MetroNet has agreed to pay AT&T Corp. a break-up fee of
$75 million if, under specified conditions, the transaction is not completed.
Support Agreements: Certain major MetroNet shareholders have entered into agreements with
AT&T Corp. under which they have agreed to support the transaction.
Fairness: MetroNet's board was provided with fairness opinions by both Salomon Smith Barney
and RBC Dominion Securities.
Accounting: It is anticipated that the merger will be accounted for as a purchase with a portion
of the purchase price to be allocated to intangible assets including goodwill. The actual
allocation of purchase price and selection of amortization periods is subject to further
evaluation.
Stock Price Collar: None.
Board Approval: Has been approved by the companies' boards.
Shareholder Approval: Approval is required by MetroNet shareholders and will be sought at a
shareholder meeting expected to be held in May, 1999.
Board of Directors: New board for MetroNet Communications with 12 members on which
AT&T Corp. will have 4 seats upon the consummation of the transaction.
Conditions: The transaction is subject to approval by MetroNet shareholders, regulatory and
court approvals, required consents, and other customary closing conditions.
Merger Consummation: Expected by the end of the second quarter of 1999.
Merger of AT&T Canada and MetroNet Communications
Summary of Combined Company
Combined Company Name: AT&T Canada Corp.
Estimated 1999 Revenues: Approximately $1.4 billion (85% from business
customers).
Property, Plant and Equipment: Nearly $2.0 billion.
Total Assets: More than $3.5 billion.
Total Employees: More than 4,000.
Sales Employees: More than 700.
Local Service Access Lines: Approximately 200,000.
Long Distance Minutes: Approximately 5 billion.
Internet subscribers: Approximately 165,000.
Buildings Accessed: Over 2,400.
Fiber Optic Intracity Route Kilometres: More than 3,800.
Fiber Optic Long Distance Route Kilometres: Nearly 16,000 (includes
intercity and cross border fibre routes currently being constructed by
MetroNet).
Frame Relay Switches: More than 70.
ATM Switches: More than 400.
About AT&T Canada Corp.:
AT&T Canada Corp., a pioneer in competitive long distance, is a national, facilities-based
telecommunications carrier serving business and residential customers with a variety of
long-distance voice and data services. AT&T Canada delivers service from 147 offices across
the country, including 40 sales offices. ACC TelEnterprises, a member of the AT&T Canada
family, is one of Canada's largest resellers of telecommunications services, including long
distance, Internet, paging, toll free, local line and data services, and is a particularly strong
competitor in the university, affinity and small business markets. More information about AT&T
Canada can be found on the company's web site at: www.attcanada.com.
About MetroNet Communications:
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 local and
long distance voice, data and Internet services - with one point of contact, excellent customer
service and competitive pricing. 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. Visit MetroNet's web site,
www.metronet.ca, for more information about the company.
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, AT&T
Canada, and ACC TelEnterprises. 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 MetroNet Communications' recent filings with the Securities and Exchange Commission and
the Canadian Securities Commissions.
Press Conference Scheduled:
MetroNet Communications and AT&T Canada will hold a joint press conference at 11:00 a.m.
(Eastern Time) this morning at The News Theatre, 98 The Esplanade, Toronto. Senior
management from both companies will discuss the announcement and, following brief statements,
will respond to questions. Live coverage of the press conference, followed by B-roll, is
available via satellite on Anik E2C/3B, downlink 3280 Mhz (vertical), Channel 6, Audio
sub-carriers 6.8 & 6.2. A live audio bridge to the press conference will also be available by
calling 1-888-209-3766 (within North America) or 1-212-271-4742 (outside North America).
Rebroadcasts of the audio conference will be available at 1p.m. EST by calling
1-800-558-5253, using the passcode 1897892. For technical information: News Theatre
416-361-0070 ext. 237.
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