Shareholders to receive pounds 2.2bn windfall

BT's 2.3 million shareholders are to receive a substantial windfall in the shape of a 35p-a-share special dividend, worth a total of pounds 2.2bn, regardless of whether the takeover of MCI goes ahead, writes Chris Godsmark.

The dividend, worth 10 per cent of the value of BT shares at their closing price of 351p last Friday, accounts for just under half the cash which the company will offer to secure the deal and will be paid in September 1997.

To further soften the blow, BT said its final dividend for the year to the end of next March would be 19.85p, an increase of 6.1 per cent on the same period in 1996.

The interim dividend for the six months to 30 September will be 7.9p - 6 per cent up on the previous year.

Explaining the financial implications of the takeover, Robert Brace, BT's finance director, said: "MCI shareholders get some cash and the BT shareholders get some cash. We think they'll like it and that's why we've done it."

In a complex arrangement a further pounds 2.3bn ($3.7bn) in cash will be paid to MCI investors in the form of $6 for each share they hold.

The rest of the estimated $21bn which BT is paying for the 80 per cent of MCI which it does not already own will be in the form of BT shares, which will be renamed Concert shares.

Existing MCI shareholders will get 0.54 Concert shares for each MCI share they own. BT shares trade in the US in the form of American Depository Shares, which are equivalent to 10 ordinary shares in the company in the UK.

Valuing the deal depends on the performance of BT shares. Using Friday's closing price and then subtracting the final and special dividends, which are together worth 54.85p, it suggests MCI shares are worth $32.22.

This compares with a price of $30.25 when MCI shares were suspended in New York on Friday and is somewhat lower than the $35-$37 a share BT sources had privately said was the likely range the company would have to pay.

The deal will transform BT's balance sheet, raising the company's debt by about pounds 3.5bn and increasing its gearing from around 8 per cent to some 65 per cent, which Mr Brace argued was a more efficient level.

How Concert shapes up

Sales per annum $42bn

Number of Employees 180,000

Number of Countries 72

Number of customers 43 million

Market value pounds 33bn

Industry rank 4th

Key facts of the merger

One MCI share = 5.4 BT shares + $6 cash

Concert = 34% MCI / 66% BT

Special dividend = 35p per share or pounds 2.2bn

Advance corporation tax credit available

10% share buyback proposed

pounds 500m a year savings in five years

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones