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WorldCom Strikes Deal to Acquire CompuServe

Technology: The $1.2-billion stock agreement won approval of CompuServe's board. WorldCom is also looking to buy an America Online unit.

September 08, 1997|From Bloomberg News

WorldCom Inc. agreed to buy CompuServe Corp. for almost $1.2 billion in stock and is in talks to buy an America Online Inc. unit to become the biggest provider of services to link businesses over the Internet, people familiar with the transaction said.

CompuServe's board voted to approve the transaction Sunday morning, they said.

CompuServe shareholders, including 80% owner H&R Block, will receive about $13 in WorldCom stock for each share. WorldCom then would acquire AOL's business-services unit in exchange for CompuServe's consumer division, $200 million and other considerations, the sources said.

WorldCom in the last 14 years has expanded from being a long-distance phone company to a top provider to businesses of Internet access and other technologies to transmit information. WorldCom will probably add CompuServe and the AOL unit to its Uunet Technologies Inc. unit, which links corporations to the Internet and distant offices.

The transaction also lets H&R Block jettison a business it has been trying to unload for more than a year and concentrate on its tax-preparation business, analysts said.

H&R Block will use proceeds from the sale to buy back stock and expand its profitable financial-services business, especially its sub-prime mortgage lending division, the sources said.

For AOL, the swap could add 2.6 million consumers to the more than 9 million subscribers it already has. That would catapult AOL past the 10-million subscriber number it had been promising investors it would reach by year-end. AOL would also get discounted networking rates from WorldCom as part of the transaction, the sources said.

Officials of Kansas City, Mo.-based H&R Block, Columbus, Ohio-based CompuServe and Jackson, Miss.-based WorldCom weren't immediately available to comment. Dulles, Va.-based AOL declined to comment.

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