AT&T Canada, Metronet to combine
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.
((--New York Newsdesk 212 859-1610)) |
