WorldCom, Inc. and MFS Announce Merger To Form Premier Business Communications Company
JACKSON, Miss. and OMAHA, Neb. (August 26, 1996) --
WorldCom, Inc. and MFS Communications Company, Inc., (MFS) jointly
announced today that the two companies have executed a definitive
Agreement and Plan of Merger.
Under the terms of the agreement, each share of MFS common stock
will be exchanged for 2.1 shares of WorldCom, Inc. common stock. As of
Friday's closing, the merger consideration for MFS stock is
approximately $14 billion. The merger agreement was unanimously
approved by the Board of Directors of each company and the transaction
will be recommended by each board to its shareholders for consideration
at a special shareholder meeting to be called by each company. The
combined company will be known as MFS WorldCom. A brief summary of
significant terms of the merger agreement is attached.
Merger Creates Premier Business Communications
Company
The merger will create one of the world's premier business
communications companies, providing a single source for a full range of
local, long distance, Internet and international service over an
advanced fiber optic network.
"Rarely in business do you have the opportunity to bring
together the premier growth companies from key segments of an
industry," said Bernard J. Ebbers, president and CEO of WorldCom,
Inc. "We are creating the first company since the breakup of
AT&T to bundle together local and long distance services carried
over an international end-to-end fiber network owned or controlled by a
single company.
"The merger is especially compelling because of the unique fit
between WorldCom, Inc., MFS and UUNET.
"First, since WorldCom, Inc.'s networks will connect to
MFS' city networks, we expect to achieve significant cost savings
from reduced line and access costs. Second, the merger will eliminate
duplication of capital spending programs, including those for undersea
capacity, international facilities and MFS' planned U.S. intercity
network. Third, the combined company is uniquely positioned to take
full advantage of the congressional intent behind the Telecom Act as
well as the recently released FCC Interconnection Order.
"Taken together, we expect these cost savings alone, including
payment for originating and terminating both local and long distance
calls, to substantially justify the merger. However, perhaps the most
exciting opportunity for MFS WorldCom is to simultaneously increase
revenue and increase customer retention by offering a unique
combination of local, long distance and international calling and
Internet-based services sold by a combined sales force of nearly 3,000
professionals."
James Q. Crowe, chairman and CEO of MFS said, "Bernie Ebbers
and WorldCom, Inc. are at the very top of all American companies in
creating shareholder value. I look forward to joining Bernie's team
and helping to continue that record."
John Sidgmore, president and CEO of UUNET Technologies, Inc., said,
"The merger of MFS and UUNET combines the nation's leading
provider of Internet services to business with a state-of-the-art local
fiber optic network in the U.S. and Europe. The merger with WorldCom,
Inc. adds the one missing element, a broadband intercity network. I
believe the combined company will be the leader in assisting businesses
to harness the full power of Internet-based technologies. I am
particularly excited about our combined ability to meet the explosive
demand for corporate 'Intranets' utilizing technology and
facilities available from a single source."
The merged company will have current annualized revenue of
approximately $5.4 billion, with over 500,000 business customers
throughout North America, Europe and Asia. On a combined basis
annualized second quarter revenues grew at almost 30 percent over the
prior year. At the heart of the combined company will be an end-to-end
fiber network with 25,000 miles of fiber in service or under
construction connecting all major metropolitan areas in the United
States.
Combined Company Organization
Bernard J. Ebbers will serve as president and CEO of MFS WorldCom with
James Q. Crowe serving as chairman of the board of MFS WorldCom, and
chairman and CEO of MFS; John Sidgmore serving as a vice chairman of
MFS WorldCom, and president and COO of MFS and CEO of UUNET; Roy
Wilkens serving as a vice chairman of MFS WorldCom, and president and
CEO of WilTel Network Services; and Royce Holland serving as vice
chairman of MFS.
The combined company's board of directors will consist of an odd
number of directors with WorldCom, Inc. designating one more director
than MFS.
International Opportunities
The combined company is particularly well positioned to benefit from
the global trend toward pro-competitive regulation. The combined
company has annualized second quarter international revenues of over
$800 million -- up 80 percent over the last twelve months.
Ebbers said, "The combined company can capitalize on both
MFS' and WorldCom, Inc.'s leading international positions,
particularly in Europe. The opportunity to jointly sell service using
MFS' local networks in France, Germany and the United Kingdom is
particularly exciting, since those countries together make up almost
two-thirds of the European telecom market."
MFS WorldCom to Use Purchase Accounting
The combined company anticipates the merger will be accounted for as a
purchase with a substantial portion of the purchase price to be
allocated to intangible assets including goodwill. It is expected that
these intangible assets will be amortized over 40 years. The actual
allocation of purchase price and selection of amortization period is
subject to further evaluation.
The company believes that the merger will be value accretive in the
short term and earnings accretive in the longer term.
Treatment of MFS Bondholders
As currently structured, the transaction calls for MFS to become a
wholly owned subsidiary of MFS WorldCom. This structure may give the
holders of MFS' 9 3/8 percent Senior Discount Notes due 2004 and
its 8 7/8 percent Senior Discount Notes due 2006, upon consummation of
the merger, the right to require MFS to repurchase those notes at an
amount equal to 101 percent of the accreted amount thereof. However,
MFS and WorldCom, Inc. are continuing to evaluate alternative
structures for the transaction and the implications of those structures
and, upon mutual agreement, could modify the structure in a way which
might result in the holders of MFS notes not having the right to
require repurchase of those notes.
Closing Expected in Four to Eight Months
The parties hope to complete the merger within four to eight months.
Consummation of the merger is subject to typical conditions including
approval of the stockholders of each of the companies,
Hart-Scott-Rodino clearance and approval of the Federal Communications
Commission and various state regulatory authorities.
The merger agreement provides for options on the part of each
company to purchase a number of shares of the other (equal to
approximately 20 percent of the outstanding shares) under certain
circumstances and also provides for the payment of fees and the
provision of communication services in the event of termination of the
merger agreement under certain circumstances.
Uncertainties Relating To Forward Looking Statements
This press release contains forward looking statements that involve
risks and uncertainties, including the satisfaction of the conditions
to the transaction and the successful integration of WorldCom, Inc. and
MFS, competitive and regulatory risk associated with the
telecommunications and Internet industries, and other risks detailed
from time to time in the SEC reports filed by WorldCom, Inc. and MFS,
including the report on Form 10-K filed by WorldCom, Inc. for the year
ending December 31, 1995, and the report on Form 10-K filed by MFS for
the year ended December 31, 1995. Actual results, events and
performance may differ materially.
Company Descriptions
Headquartered in Jackson, Mississippi, WorldCom, Inc. is one of the
largest long distance telecommunications companies in the United
States, offering domestic and international voice, data and video
products and services to business customers, other carriers and the
residential market. The company operates a nationwide digital fiber
optic network and has worldwide network capacity. The common shares of
WorldCom, Inc. trade on the Nasdaq Stock Market under the symbol
WCOM.
MFS is a leading provider of communication services for business and
government. Through its operating company subsidiaries, MFS provides
one-stop shopping for integrated local and long-distance services as
well as a wide range of high quality voice, data and other enhanced
services and systems specifically designed to meet the requirements of
business and government customers. MFS' common stock is traded on
the Nasdaq Stock Market under the symbol MFST. MFS is headquartered in
Omaha, Nebraska.
Recently merged with MFS, UUNET is a leading national and
international provider of a comprehensive range of Internet access
options, applications, security products and consulting services to
businesses, professionals, and on-line service providers. UUNET is
recognized as the first commercial Internet Service Provider.
Summary of Significant Terms
Tax-Free Merger of MFS and WorldCom, Inc.
This summary is qualified in its entirety by the definitive merger
agreement that will be filed with the Securities and Exchange
Commission. Please refer to the agreement for a complete description of
the terms of the transaction.
Consideration
-
WorldCom, Inc. Common Stock in a tax-free transaction (the
"Transaction").
Exchange Ratio
-
2.1 shares of WorldCom, Inc. Common Stock per MFS Common Share. Fixed
exchange ratio. MFS Preferred Stock to be converted into similar shares
of WorldCom, Inc. Preferred Stock.
Conditions
-
Shareholder approval of both companies.
-
Federal and state regulatory and Hart-Scott-Rodino approvals.
-
Receipt of tax opinions.
-
No injunction.
-
No material adverse change in MFS' or WorldCom, Inc.'s
business.
Options to Purchase Stock
Subject to specified conditions, each party has the option to
purchase up to 19.9 percent of the outstanding shares of the other
party. WorldCom, Inc.'s option to acquire MFS shares priced at
$55.39. MFS' option to acquire WorldCom, Inc. shares priced at
$26.38.
Termination Arrangements
-
$350 million fee to be paid, together with an agreement to provide
telecommunications services, by the party failing to complete the
Transaction.
-
The telecommunications services will be provided by the party failing
to complete the Transaction, at the option of the other party, at cost
with a value not to exceed $300 million over 3 years.
PRESS CONFERENCE SCHEDULED
WorldCom, Inc. and MFS have scheduled a joint press conference on
Monday, August 26, 1996, at 10 a.m. (Eastern Time) in the Wedgewood
Room of the Hotel Pierre, 2 East 61st, New York, NY, with Bernard J.
Ebbers, president and CEO of WorldCom, Inc. and James Q. Crowe,
chairman and CEO of MFS, along with John W. Sidgmore, president and CEO
of UUNET to discuss the above announcement. Following some brief
statements the participants will respond to questions.
ANALYST MEETINGS SCHEDULED
WorldCom, Inc. and MFS have scheduled a series of analyst meetings
for institutional investors in Boston, New York, San Francisco and
Denver with Bernard J. Ebbers, president and CEO of WorldCom, Inc. and
James Q. Crowe, chairman and CEO of MFS, along with John W. Sidgmore,
president and CEO of UUNET to review and discuss the merger.
The meetings are scheduled as follows:
Tuesday, August 27 - Meridian Hotel - 7:30-9:00 a.m.
Timberlay Room
250 Franklin
Boston, MA
Tuesday, August 27 - Hotel Pierre - 12:30-2:00 p.m.
Grand Ballroom
2 East 61st
New York, NY
Wednesday, August 28 - Park Hyatt - 7:30-9:00 a.m.
Commodities Room
333 Battery Street
San Francisco, CA
Wednesday, August 28 - Hyatt Hotel - 2:00-3:30 p.m.
Vista Room
1750 Welton Street
Denver, CO
CONFERENCE CALL
IF YOU WISH TO PARTICIPATE, PLEASE CALL 1-800-553-2599 (within the
U.S.) or 303-267-1002 (international participants). PLEASE REFER TO
CONFIRMATION NUMBER 128418.
Following the call, rebroadcasts will be available immediately and
will continue through Wednesday close of business, eastern time. To
hear the rebroadcast call, 1-800-696-1588 (within the U.S.) or
303-267-1037 (international participants). Please refer to confirmation
number 128418.
