“Merge Or Die.”
– Dennis Bell.
NEW YORK (Reuters) – MCI WorldCom Inc. (Nasdaq:WCOM – news), the second-biggest U.S. long-distance company, Tuesday said it would buy No. 3 carrier Sprint Corp. (NYSE:FON – news) in a deal valued at $129 billion, by far the biggest corporate takeover ever.
The combined company, to be called WorldCom, would have about 30 percent of the $90 billion U.S. long-distance market and create a huge rival to market leader AT&T Corp. (NYSE:T – news) .
MCI WorldCom muscled aside a last-gasp bid for Sprint from BellSouth Corp. (NYSE:BLS – news), the dominant local telephone company for the southeastern United States.
MCI WorldCom said in a statement it would pay $76 in stock for each Sprint share. Clinton, Miss.-based MCI WorldCom said each share of Sprint’s wireless unit, Sprint PCS Group, would be swapped for one new WorldCom PCS tracking stock and 0.1547 share of MCI WorldCom common stock.
The exchange ratios give the stock portion of the deal a value of $115 billion. MCI WorldCom also will assume $14 billion in debt and preferred stock, giving the deal an overall value of $129 billion, the company said.
At that price the deal dwarfs all others to date. That includes oil giant Exxon Corp.’s (NYSE:XON – news) planned $80 billion purchase of rival Mobil Corp. (NYSE:MOB – news) and the $72 billion deal pending between regional phone companies SBC Communications Inc. (NYSE:SBC – news) and Ameritech Corp. (NYSE:AIT – news) .
Shares in Westwood, Kan.-based Sprint closed Monday at 60 on the New York Stock Exchange. They were up at 63-1/2 in pre-opening trade on the Instinet electronic broker system. MCI WorldCom’s offer represents a 27 percent premium over Monday’s closing price.
MCI WorldCom slipped to 68-3/8 from a close of 71-10/16.
MCI WorldCom had wanted Sprint to gain its long-distance service and especially to fill its need for a wireless system. Sprint’s fast-growing wireless network covers about 180 million Americans.
“WorldCom will have the capital, proven marketing strength and state-of-the-art networks to compete more effectively against the incumbent carriers domestically and abroad,” MCI WorldCom President and Chief Executive Bernard Ebbers said.
MCI WorldCom said the boards of the two companies had approved a definitive agreement to merge.
The deal is expected to close in the second half of next year and is not expected to hurt WorldCom’s earnings per share, the company said.
When the merger is completed, Sprint Chairman and Chief Executive William Esrey will become WorldCom chairman. MCI WorldCom’s Ebbers will become president and chief executive of the combined company.
In a separate statement, Germany’s Deutsche Telekom AG (NYSE:DT – news) said it would sell its 10 percent stake in Sprint for about $9.2 billion.
France Telecom (NYSE:FTE – news) also holds a 10 percent stake in Sprint.
The deal may face rigorous regulatory scrutiny.
SBC, whose deal for Ameritech is being reviewed by regulators, said in a statement that it expected regulators to ”bring equal vigor and zeal to reviewing the MCI WorldCom-Sprint merger as they have other transactions.”