Choosy Bride MCI Says Yes to WorldCom

MCI Communications Corp. and WorldCom Inc. today announced a merger agreement worth US$37 billion, winning out over prior MCI suitors British Telecommunications PLC and GTE Corp.

MCI Communications Corp. and WorldCom Inc. today announced a merger agreement worth US$37 billion, winning out over prior MCI suitors British Telecommunications PLC and GTE Corp.

MCI and WorldCom announced today that both companies' boards of directors had unanimously approved the move, following WorldCom's 20-percent boost of its original $30 million offer.

Under the terms of the agreement, MCI stockholders, except BT, will receive US$51 of WorldCom common stock for each MCI share, MCI and WorldCom officials said. BT, which owns 20 percent of MCI's stock, will receive $51 per share in cash for each of the Class A MCI shares it owns, for a total of around $7 billion, officials said.

WorldCom President and CEO Bernard Ebbers will become president and CEO of the new company, which will be called MCI WorldCom. MCI Chairman Bert Roberts will become chairman of the new company, and WorldCom CEO Gerald Taylor will become vice chairman.

Refering to MCI, BT and GTE, MCI's Roberts said that in accepting Worldcom's offer, MCI was choosing "the best opportunity among the three."

The $21 billion merger agreement between BT and MCI was nearly complet, blessed by shareholders of both companies and regulators on both sides of the Atlantic, when early last month WorldCom cooed its $30 million offer in MCI's ear. Two weeks later GTE made MCI an all-cash $28 million offer of its own, and MCI began to sort through the suitors.

MCI's Roberts made no apology for the industry turmoil that has accompanied MCI's attempt to find a mate.

"When you are in a communications revolution, sometimes things don't always happen in an orderly fashion," Roberts said.

Analysts agreed that the merger underscores the emergence of a new era in telecommunications, as telecommunications companies scramble to move beyond voice service in a single market, such as long distance or local, to offer voice and data services in multiple markets on a global basis.

"I think [the MCI-WorldCom merger is] going to sort of catalyze the whole industry," said Mark Winther, an analyst at International Data Corp. in New York. "It's going to be a completely different ballgame three or four months from now," from MCI WorldCom rolling out new services to newly announced AT&T chairman and CEO Michael Armstrong making moves of his own, Winther said.

Boyd Peterson, an analyst with The Yankee Group Inc. in Boston, said that MCI and WorldCom come from similiar cultures and should form a profitable team. "They have a lot of complementary capabilities," including MCI's systems integration and software groups and WorldCom's entrepreneurial energy, Peterson said.

In fact, MCI may be especially attracted by WorldCom's youth and energy, according to Peterson. The Jackson, Mississippi-based company has surprised the industry over the last couple of years with its rapid growth and agressive acquisition schedule, which has included MFS Communications Co. Inc. and NLnet, a Netherlands-based Internet service provider.

The merger with WorldCom is a way for MCI "to recapture some of the vigor of its youth," Peterson said.

Though the companies' officials are satisfied with the union, still pending is stockholder and U.S. regulatory approval, from the U.S. Federal Communications Commission, the U.S. Department of Justice, and assorted state regulatory bodies. MCI and WorldCom officials estimated that the approval process would take six to nine months.

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