Here's another one that adds some details:
news.com
Global Crossing to Buy Frontier Corp. for $12.5 Bln
(Update8)
Bloomberg News
March 17, 1999, 1:23 p.m. PT
Global Crossing to Buy Frontier Corp. for $12.5 Bln (Update8)
(Adds closing share prices.)
Hamilton, Bermuda, March 17 (Bloomberg) -- Global Crossing
Ltd., a phone company that went public in August, agreed to buy
Frontier Corp. for $12.5 billion in stock and assumed debt,
giving it U.S. Internet access, voice and data services.
Frontier holders will get $62 for each of their shares if
Global Crossing trades between $34.56 and $56.78 before the
transaction is completed. That's 39 percent more than Frontier's
close yesterday. Hamilton, Bermuda-based Global Crossing also
will take on $1.3 billion in Frontier debt.
The acquisition of Rochester, New York-based Frontier is the
latest step by Global Crossing toward becoming a worldwide phone
company. It initially focused on building undersea fiber-optic
cables for use by Deutsche Telekom and others. The company was
founded in 1997 by Gary Winnick, a billionaire financier who once
worked with Michael Milken at Drexel Burnham Lambert Inc.
''It creates a real powerhouse with a global (Internet)
network,'' said Leslie Stonestreet, an analyst at NationsBanc
Montgomery Securities Inc. in San Francisco, who had a ''buy''
rating on Frontier. ''Global Crossing has the international
scope, which Frontier was lacking.''
Shares of Frontier rose 5 7/8 to 50 1/2, while Global
Crossing fell 4 3/8 to 47 1/8. Yesterday, Frontier jumped 6
percent and Global Crossing, whose main offices are in Los
Angeles, slumped 9 percent.
The combined company, with an estimated market value of
about $30 billion, will have annual sales of $4 billion and
earnings of about $1 billion before interest, taxes, depreciation
and amortization. The companies expect few jobs to be eliminated
among its more than 8,500 employees.
Global Crossing shareholders will own two-thirds of the
company, with Frontier shareholders owning the remaining third.
The acquisition is expected to be completed by October.
Frontier
The sale comes two months after Frontier said it was
considering spinning off operations, making acquisitions or
creating a tracking stock to boost its share price.
Over the past two years, Frontier has expanded from a local
phone company into a nationwide provider of long-distance, data,
Internet and Web hosting services.
Global Crossing needed a nationwide U.S. voice and data
network to compete against larger rivals such as AT&T.
''We will now have a strong U.S. infrastructure to
complement the (Internet)-based fiber network we are building,''
said Robert Annunziata, chief executive of Global Crossing, who
was hired away from AT&T three weeks ago to run the company.
In an interview, Annuziata said he expects Global Crossing
to buy more U.S. local phone companies that have networks. Talks
with Frontier began soon after Annunziata joined Global Crossing.
Frontier runs Internet sites for the online operations of
many companies, including Yahoo! Inc., Microsoft Corp. and Lycos
Inc. About 60 percent of the searches for information over the
World Wide Web are run by Frontier, the company said.
Buying Bigger Rivals
Large phone companies such as AT&T, Sprint Corp., GTE Corp.
and Qwest Communications International Inc. are also customers.
The company's local phone operations will continue to be
managed out of Rochester. It provides local service in 32 states
and the District of Columbia.
Global Crossing may try to sell Frontier's U.S. local phone
and wireless operations, analysts said. Possible buyers include
the large U.S. regional phone companies such as SBC
Communications Inc.
Still, Annunziata downplayed the speculation. ''We're not in
the mode right now of selling that off or spinning it off,'' he
said.
The purchase also fueled speculation about other industry
combinations. Other possible acquisition candidates include IXC
Communications Inc., Pacific Gateway Exchange Inc. and even
utility and fiber optic network operator Montana Power Co.,
analysts said.
Acquisition Speculation
The acquisition is the latest example of a smaller phone
company buying a bigger rival with nationwide U.S. operations.
WorldCom Inc. completed its acquisition of MCI Communications
Corp. last year, while Qwest Communications International Inc.
bought LCI International Inc. last year.
''It's a trend where infrastructure owners and builders want
to leverage their network and put as much traffic as they can on
the network,'' said Christine Nairne, an analyst at BancBoston
Robertson Stephens International Ltd. in London.
Global Crossing may have purchased Frontier, in part, to
avoid becoming a takeover target of larger competitors, said
Robert Wilkes, an analyst at Brown Brothers Harriman & Co., who
doesn't rate either company.
Standard & Poor's Corp. and Moody's Investors Service Inc.
said they may raise their credit ratings for Global Crossing and
lower Frontier's ratings because of the purchase.
With Frontier, Global Crossing will have the first global
network based on the technology used in the Internet, which is
more efficient than traditional telephone network technology.
Investment Advisers
Joseph Clayton, Frontier's chief executive, will become vice
chairman of Global Crossing and Rolla Huff, Frontier's president
and chief operating officer, will become president and chief
operating officer of Global Crossing's North American operations.
Four Frontier directors will join Global Crossing's board.
If the acquisition fails, Global Crossing has the right to
buy up to 19.9 percent of Frontier's shares at $62 each.
The sale is subject to approval by shareholders, the U.S.
Federal Communications Commission and other regulatory approvals.
Merrill Lynch & Co., Salomon Smith Barney Inc., and Chase
Securities Inc. advised Global Crossing. Morgan Stanley Dean
Witter & Co. advised Frontier. Skadden, Arps, Slate, Meagher &
Flom gave legal advice to Global Crossing, while Simpson Thacher
& Bartlett gave legal advice to Frontier. |
