WORLDCOM AIMS FOR SKY WITH MCI; UPSTART MAKES BID FOR TELEPHONE GIANT.
Barging in on a grand trans-Atlantic telecommunications alliance, an upstart long-distance telephone company Wednesday made an unsolicited offer to buy MCI Communications Corp. for $30 billion in stock.
The upstart, Worldcom Inc., hopes to scuttle a merger agreement between MCI, the nation's second-largest long-distance company, and British Telecommunications. And with a bid that's $9 billion richer than the existing offer, analysts said Worldcom stands a good chance of snatching MCI from Britain's flagship national carrier.
Worldcom, based in Jackson, Miss., has grown from obscurity into the nation's fourth-largest long-distance company, as well as a leading carrier of Internet traffic, through a relentless series of acquisitions in recent years. But swallowing MCI would be a breathtaking gulp, even for a company that has made a sport of buying bigger competitors.
Still, whether or not the deal goes through, the strategy behind it is stark evidence of how the telecommunications industry is shedding old distinctions - local vs. long distance, voice traffic vs. data transmission - like so much vestigial skin.
Worldcom's goal is to become the industry's first one-stop shop, offering all these services in a seamless package, with an emphasis on serving business customers.
``Worldcom is at the forefront of an unstoppable trend toward very large, vertically integrated companies,'' said Daniel Reingold, an analyst at Merrill Lynch & Co.
The proposal, which was made in a phone call Wednesday from Worldcom's chief executive, Bernard J. Ebbers, to MCI's chairman, Bert Roberts Jr., left even the most deal-jaded executives aghast.
It would rank as the largest takeover in American history. And it is the first unsolicited bid for a phone company since the passage of the new communications law in early 1996, which opened the door to the kind of cowboy capitalism in which Ebbers and Worldcom specialize.
Worldcom, offering a 41 percent premium over MCI's share price at the opening of the stock market Wednesday, is clearly betting on the restiveness of MCI's shareholders.
Those investors were recently asked to accept a 20 percent reduction in the price British Telecom would pay for MCI after MCI forecast unexpectedly high losses in its nascent local telephone business.
Several analysts predicted Wednesday that MCI would be hard pressed not to accept the higher offer from Worldcom, which would pay the equivalent of $41.50 for each MCI share.
As if Worldcom's bold bid for MCI weren't enough, the company also announced Wednesday that it has also agreed to buy Brooks Fiber Properties for $2.4 billion.
Brooks is one of the largest providers of what's known as bypass service - local communications service provided to business customers as an alternative to the local telephone company - and has networks and switching equipment in 44 mid-size cities. Worldcom is also a leader in bypass services, and together the two companies have local networks in 86 large and mid-size metropolitan markets.
WORLDCOM CALLS OUT TO MCI
WorldCom Inc. has made a hostile offer to buy long distance telecommunications rival MCI Communications Corp. for nearly $30 billion, off-setting a bid from British Telecom.
Headquarters: Jackson, Miss.
History: In 1995, changed name from LDDS Communications.
Employees: About 13,000
Business: Fourth-largest long distance company; customers are predominantly corporations. Last month, WorldCom agreed to buy CompuServe for $1.2 billion, then divided it with America Online.
Headquarters: Washington, D.C.
History: In 1971, became the first company authorized by the FCC to compete against AT&T in the long distance market.
Employees: About 55,000
Business: Currently the second largest long distance company.
Offering $41.50 worth of its stock for each MCI share; this moves out British Telecom's offer last November of $34.15 a share.
If successful, the WorldCom / MCI combination would be the nation's second largest telecommunications company behind AT&T.
Top U.S. corporate mergers if WorldCom Inc. completes its acquisition of MCI Communications Inc., showing target name, acquirer name, value in dollars unadjusted for inflation:
1. WorldCom Inc. offers to buy MCI Communications Inc. for stock valued at about $29.3 billion, announced Oct. 1, 1997, in competition with an earlier $24 billion merger agreement between MCI and British Telecommunications PLC.
2. Bell Atlantic Corp. combines with Nynex Corp. in an exchange of stock valued at $25.6 billion, completed Aug. 14, 1997.
3. RJR Nabisco Inc., merger with Kohlberg Kravis Roberts & Co., $25 billion, completed in 1989.
4. Walt Disney Co. buys Capital Cities/ABC for $19 billion in cash and stock, completed in 1996.
5. SBC Communications Inc. buys Pacific Telesis Group for $16.7 billion in stock, completed April 1, 1997.
6. Boeing Co. acquires McDonnell Douglas Corp. for $16.3 billion, completed July 31, 1997.
7. Wells Fargo & Co. buys First Interstate Bancorp for $14.2 billion, completed in 1996.
8. Warner Communications Inc. merger with Time Inc., $14.11 billion, completed in 1990.
9. Kraft Inc., merger with Philip Morris Inc., $13.44 billion, completed in 1988.
10. Gulf Corp., merger with Standard Oil Co. of California, $13.4 billion, completed in 1984.
2 Photos, 2 Boxes
PHOTO (1--color) Bert Roberts Jr.
(2--color) Bernard J. Ebbers
BOX: (1) WORLDCOM CALLS OUT TO MCI (see text)
SOURCES: News reports, MCI, Worldcom; research by Kerry G. Johnson.
Knight-Ridder Tribune Graphics Network
(2) BIG DEALS (see text)
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Oct 2, 1997|
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