April 22, 1996
NYNEX MEDIA CONTACT: Media Relations,
Bell Atlantic and NYNEX Agree to Merger of Equalssize>
Merger Will Create Market Leader and Nation's Second Largest Telecommunications Companysize>size>
PHILADELPHIA/NEW YORK -- The boards of directors of
Bell Atlantic (NYSE:BEL) and NYNEX (NYSE:NYN)
have unanimously approved a definitive agreement for a merger of equals between the two
corporations with a combined market value in excess of $50 billion.
The merger will create the nation's second largest telecommunications company, with
133,000 employees, 1995 revenues of $27.8 billion (including unconsolidated wireless)
and earnings of $3.1 billion (after adjustments for special items). The company will
provide telecommunications, entertainment and information services to 26 million customers
in 13 Northeastern and Middle Atlantic states and the District of Columbia -- the most
communications-intensive region of the country -- as well as to customers throughout the
nation and the world. The new company will also be one of the world's largest providers
of wireless communications, serving 3.6 million customers.
The name of the new company will be Bell Atlantic. The corporate headquarters will be
in New York City. The new company will maintain significant operations in Boston,
Philadelphia, and Arlington, Va.
Under the terms of the agreement, NYNEX shareholders will receive one share in the new
company for each NYNEX share owned and Bell Atlantic shareholders will receive 1.302
shares in the new company for each Bell Atlantic share owned. The transaction is
expected to be accounted for as a pooling of interests and to be tax-free to both
companies' shareholders. Closing is expected within 12 months.
The board of directors of the new company will consist of an equal number of members
from each company's board.
Raymond W. Smith, chairman and chief executive officer of Bell
Atlantic, will be the chairman and chief executive officer of the new company.
Ivan G. Seidenberg, chairman and chief executive officer of
NYNEX, will be vice chairman, president and chief operating officer. According to
the terms of the agreement, Seidenberg will become chief executive officer of the
new company approximately one year after the closing of the merger, and chairman
upon Smith's retirement.
The designated key management team for the new company will consist of top managers
from Bell Atlantic and NYNEX. The new chief financial officer and executive vice president,
Finance and Corporate Development, will be Frederic V. Salerno,
currently vice chairman, Finance and Business Development, NYNEX.
The heads of the major business units will be:
- Lawrence T. Babbio, Jr., currently vice chairman,
Bell Atlantic, will be president and CEO, Wireless & Global Enterprises;
- James G. Cullen, currently vice chairman, Bell Atlantic,
will be president and CEO, Telecom Group;
- Richard A. Jalkut, currently president and group executive,
NYNEX, will be president and CEO, Network Services.
"This new company will serve the world's best communications marketplace.
By combining, we will be able to increase our revenues, reduce our costs, and improve
our service. Under a single brand we will build on our common strengths and provide our
customers with tremendous value," Smith said.
"This is the most natural partnership in the world. We have worked well together
for years," Smith continued. "We are already a team with a successful track
record. Bell Atlantic NYNEX Mobile has shown that we can integrate two independent
businesses efficiently, with consistent and innovative service to customers, fair
treatment of employees and positive financial results for shareholders. In less than
two years, Bell Atlantic NYNEX Mobile has achieved a market leadership position with
innovative products, faster customer growth and sharply improved profitability.
"Our two companies have a significant global presence, with major operations in
Europe, Asia, Latin America and New Zealand," Smith added. "We will build on
our new partnership to strengthen our international businesses. For example, Fiber-optic
Link Around the Globe (FLAG) -- global fiber facilities from the U.K. to Japan, which NYNEX
is now building -- will give us expanded opportunities to enter into high growth markets.
Seidenberg said, "We must remain strong at home if we are to compete in the rapidly
growing global communications marketplace. Innovative marketing, quality of service and
continuing the development of a modern network will be our top priorities. In 1995, Bell
Atlantic and NYNEX invested nearly $5 billion in wireline network facilities and an
additional $700 million in our Bell Atlantic NYNEX Mobile wireless business. The new
company will maintain a strong local presence through investment and employment in the
states we serve and will continue our long-standing traditions of community involvement
and corporate citizenship.
"We are working to implement the vision of the Telecommunications Act of 1996. We
remain committed to opening our own markets to competition so that we can quickly enter
new markets such as long distance," Seidenberg added.
"We will compete aggressively for the long distance traffic originating in the
Northeast Corridor," said Seidenberg. "With over $20 billion of long distance
traffic originating within our region, we see this as a significant business opportunity.
About 45 percent of that traffic both originates and terminates within our new region and
could be carried economically over the network of the new Bell Atlantic; this is a
significantly higher volume than the two companies would carry separately.
"We are particularly excited by the opportunities in the international long distance
marketplace. Our customers currently account for approximately 35 percent of all U.S.
international calls, with a high concentration of traffic moving to and from Canada,
Europe and Japan," Seidenberg added.
The companies expect that, excluding special transition and integration charges, the
merger will be accretive to recurring earnings per share in the first year after closing.
With an expanded presence in key communications and information markets, the new Bell
Atlantic expects increased opportunities for long-term growth in both revenues and
Recurring expense savings from this proposed business combination are expected to grow
to approximately $600 million annually by the third year following closing. They will
consist of approximately $300 million in savings from operations systems and other
administrative costs and approximately $300 million in savings from a reduction of
3,000 primarily corporate and administrative management positions.
Transition and integration charges of $500 million are anticipated in the first year
following the completion of the merger. An additional $200-400 million in charges are
anticipated over the two succeeding years. Annual capital expenditures for the new
company should reflect approximately $250-$300 million of incremental purchasing
efficiencies. The new company is expected to have total cash savings of $850-900 million
per year. These savings, coupled with new revenue and margin opportunities in long
distance, video and other network services, are expected to create substantial
shareholder value for the new Bell Atlantic.
"We will continue to act responsibly toward our employees, especially those affected
by this merger, and will continue to aggressively pursue redeployment opportunities for
affected personnel," Seidenberg said. "When we created Bell Atlantic NYNEX
Mobile, we experienced an initial consolidation of jobs followed by significant marketplace
expansion, redeployment and the creation of new jobs."
The combined company will retain a strong financial position in the industry as evidenced
by its current combined net cash from operations of over $7.5 billion. The merger is
expected to produce even stronger cash flow margins through the increase in revenue growth
and reduction of costs. This will facilitate the company's ability to internally finance
its operations, capital expenditures, and dividends while maintaining a strong credit
rating, thereby providing the financial flexibility to be a major competitor in the
The new company's dividend policy will be determined by its Board of Directors after
closing. It is anticipated that the dividend per share for the new company will
initially be set at $2.36, which is the current level that NYNEX shareholders receive.
Since NYNEX shareholders will receive one share in the new company for each share of
NYNEX stock, their initial cash dividend is not expected to change. Given that Bell
Atlantic shareholders will receive 1.302 shares in the new company for each Bell
Atlantic share that they own, their equivalent cash dividend is expected to be
effectively $3.07, a 6.7% increase over the current $2.88 per share. The new
company will remain committed to providing competitive dividends to its shareholders,
viewing dividends as an important component of shareholder value.
The new company will organize along customer and service segments dedicated to consumer,
large and small business, network integration, long distance, federal systems, video and
Internet segments, among others. These lines of business will have considerable autonomy
to improve operating ratios, revenue and margin growth, expense control and performance
results. The new company will drive faster product development, create new and more
efficient distribution channels, and dramatically improve customer service.
The merger is subject to the approval of the shareholders of both companies; special
shareholder meetings will be held later this year. In addition, approvals will be
required from federal and state agencies.
Merrill Lynch acted as financial advisor and provided a fairness opinion to Bell
Bear, Stearns & Co. Inc. acted as financial advisor and provided a fairness
opinion to NYNEX. Morgan Stanley & Co. Incorporated also provided a fairness
opinion to NYNEX.
Information is also available via gopher (gopher://ba.com) or by ftp (ftp://ba.com/pub).
Information contained in this release with respect to the expected financial
impact of the proposed merger is forward-looking. These statements represent
the companies' reasonable judgment with respect to future events and are
subject to risks and uncertainties that could cause actual results to differ
materially. Such factors include: materially adverse changes in economic
conditions in the markets served by the companies; substantial delay in the
expected closing of the merger; and a significant change in the timing of
when the companies expect to be permitted to offer long distance services
within their regions.
NYNEX is a global communications and media company that provides
a full range of services in the northeastern United States and
high-growth markets around the world, including the United Kingdom,
Thailand, Gibraltar, Greece, Indonesia, the Philippines, Poland,
Slovakia and the Czech Republic.
The Corporation is a leader in the telecommunications, wireless communications,
cable television, directory publishing
and entertainment and information services.
FAX copies of recent NYNEX news releases are available free of charge, 24
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