WorldCom's cash offer for BT's 20 per cent stake in MCI raises its original $30bn all-paper offer for MCI by over a fifth to $37bn, the largest bid in corporate history. In addition, BT receives a $465m break- up fee negotiated as part of its original merger agreement with MCI, the US's third-largest long-distance telecoms carrier.
WorldCom's bid tops a competing $28bn cash offer from GTE, the local US telecoms giant. GTE said yesterday it was "considering" WorldCom's offer. Bernard Ebbers, WorldCom's chief executive who will lead the $60bn new company, MCI WorldCom, said he could justify the cash payout to BT through $5bn of extra synergies.
The deal gives BT a pre-tax gain of $2.25bn on its original investment in MCI. Sir Peter Bonfield, BT's chief executive said: "I think you could say that we have used our rights pretty well." He said the joint venture with MCI on Concert, the telecoms services company 75 per cent-owned by BT, would continue. BT has negotiated a non-exclusive contract between WorldCom and Concert to provide services for five years. BT has a call option on MCI's stake in Concert.
Sir Peter said: "We've made a lot of money out of MCI. We weren't prepared to get into a bidding battle at these levels. WorldCom is convinced that it can get extra synergies and so can pay this sort of very high premium." BT's shares closed 11p firmer at 465p, after rising to 475p at one stage yesterday.
Sir Iain Vallance, BT's chairman, answered criticisms that its failure to buy MCI left it without a global strategic alliance: "We had been unable to talk to other companies under the agreement with MCI. However, many came to us and now we can talk back.
"It wouldn't be too out of the question to say we are thinking of US partners." Sir Iain added that BT had heard from "all the usual suspects".
Asked about specific potential partners, he said: "The whole of the communications industry is in turmoil. There are big changes. Yes, we have obviously been in discussions with GTE and we remain good friends with GTE.
"We parted as good friends with Cable & Wireless. Whether there are other opportunities to do something with them, we'll have to wait and see." Sir Iain said he "would not rule out" using the cash for a share buy-back or special dividend.