BT and MCI Will Revise Merger Terms
WASHINGTON — British Telecom and MCI reached agreement Thursday night on a revised plan for BT to purchase the Washington-based long-distance telecommunications giant, at a price believed to be considerably less than the original $23.5 billion, according to sources close to the deal.
The compromise, to be announced at a briefing this morning, followed a tumultuous day of negotiations in London and Washington, as top executives from both companies sought to keep the deal from collapsing.
The new terms could not be confirmed, though analysts estimated that British Telecommunications would ask for a 10% to 15% reduction in the price it would pay for MCI Communications Corp.
The merger would be the largest foreign buyout of a U.S. company and would create the world's second-largest carrier of international telecommunications traffic.
As MCI's stock took a drubbing Thursday from investors worried about the future of the deal, the Federal Communications Commission stepped in and approved the merger several days sooner than expected--an unusual example of a government agency rushing to the aid of a U.S. company.
Any new terms would still need the approval of each company's shareholders. The changes would not be of the nature that would require the FCC and other regulatory bodies to revisit their approval, the sources said.
The latest round of turmoil for the 10-month-old deal began late Wednesday, when MCI announced that the companies were reviewing "the economic terms of their existing merger agreement." The review was in light of a surprise announcement by MCI in July that its efforts to enter the U.S. market for local telephone service would cost it $800 million this year, twice its previous estimates.
"There can be no assurance as to the outcome of the discussion," the MCI statement said. The merger agreement allows either party to renegotiate the deal in the event of a "material change" in the value of either company.
BT was under pressure from shareholders to reassess the deal, and some British investors and analysts called for reductions of as much as 20% in the price it should pay for MCI. Under the original terms, BT agreed to pay $6 in cash and a 0.54 share of each BT American depository receipt for each MCI share. BT also agreed to assume about $4 billion of MCI's debt.
- TECHNOLOGY & TELECOMMUNICATIONS Aug 06, 1993
- Boards of MCI, British Telecom Reach Agreement on Merger Deal Nov 03, 1996
- MCI Gets Postal Contract, Its Largest Ever Mar 27, 1997
