British Telecom To Buy Mci $21 Billion Makes It Biggest Foreign Purchase Of U.S. Firm
British Telecommunications has agreed to buy MCI Communications for as much as $21 billion, the biggest foreign purchase ever of a U.S. company.
The boards of both companies agreed Saturday on the deal, a cash and stock transaction worth between $36 and $38 a share, said sources speaking on condition of anonymity. A formal announcement of the merger is to be made at news conferences today in London and New York.
A combined British Telecom and MCI would provide a powerful competitor to AT&T Corp., the world’s largest long-distance phone company. It would have combined revenue of $35 billion and two marquee brand names with operations in more than 70 countries.
“You really only have had one internationally recognized global player and that’s been AT&T,” said Gary Miller, president of Aragon Consulting Group, which specializes on telecommunications and technology. “Now you have another global gorilla.”
MCI, the nation’s No. 2 longdistance company, would continue to operate under its name and keep a headquarters in Washington. British Telecommunications PLC is based in London. No further details of the combination were available.
Word of the mammoth deal, one of the largest mergers ever during a year when multibillion dollar mergers have been coming at a frenzied pace, first emerged Friday when MCI disclosed it was talking to the British phone giant.
In fact, the two have been in discussions of one sort or another ever since 1994, when British Telecom bought a 20 percent stake in MCI.
The British Telecom purchase is for the remaining 80 percent of MCI’s shares. The exact price could not immediately be determined, but sources said it was between $36 and $38 a share. At $38, the deal would be worth $21 billion. At $36 it is about $1 billion less.
A final proportion for the cash and stock wasn’t clear, although at one point the boards were considering payment of 60 percent cash for the MCI shares. The company has 690 million shares outstanding, including those held by British Telecom.
Messages left at British Telecom seeking comment were not immediately returned. MCI spokeswoman Jonelle Birney declined comment.
The merger would by far be the biggest foreign takeover of a U.S. company and mark the end of independence for MCI, a storied business in its own right that in some ways is responsible for the competition that’s transformed the U.S. telecommunications industry. It was the persistence of MCI more than 12 years ago that forced the breakup of the AT&T Ma Bell monopoly.
An MCI-British Telecommunications marriage also would radically reorder the landscape of phone service providers in the months since Congress enacted a sweeping deregulation that allows long-distance companies to compete with local phone companies and vice versa.
Cable TV operators and others are also looking to encroach on phone companies’ business. Anticipation of fierce competition from all quarters has prompted a recent spate of mergers and alliances, as no one wants to be left behind.