$28 bil MCI bid
The offer competes with bidsStar-Bulletin news services
by WorldCom and British Telecom
STAMFORD, Conn. -- GTE Corp. today offered to buy MCI Communications Corp. for $28 billion in cash, escalating a bidding war for the nation's second-largest long-distance phone company.
The bid would be the biggest all-cash deal ever, topping RJR Nabisco Inc.'s $25 billion sale in 1989.
GTE is betting that MCI shareholders will take a cash offer that's less than stock bids from WorldCom Inc. and British Telecommunications Plc, people familiar with the bid said.
GTE's board met today to vote on the offer and made an announcement after the stock market closed.
GTE would pay $40 a share in cash for MCI, or a total of $28 billion. The combined company would have $40 billion in annual revenue.
The surprise offer comes as MCI directors study an unexpected, $33.88 billion bid made by WorldCom on Oct. 1. WorldCom's bid, which includes the assumption of MCI debt, was about $9 billion more than a revised offer in August from BT.
MCI's sudden attractiveness has boosted its shares more than 23 percent since BT cut its bid, after the No. 2 U.S. long-distance company forecast an $800 million loss this year in its local phone operations. While a bidding war could lead to higher offers and share prices, some investors and analysts said WorldCom's current bid will be tough to beat.
"The stock offer enables an investor to hold onto a fast-growing company" in WorldCom, said Michael Adams, a money manager at CoreStates Investment Advisers in Philadelphia, a $20 billion portfolio with shares of GTE and WorldCom. "They'd get taxed on the cash" offered by GTE.
MCI and WorldCom officials declined to comment. Officials at BT, owner of 20 percent of MCI, also declined to comment.
Adding MCI would give GTE, the No. 3 U.S. local phone company, a 20 percent share of the nation's $70 billion-a-year long-distance market.