WorldCom, Inc. this morning appears to have won the bidding war for MCI Communications Corp.
MCI's board of directors last night accepted a sweetened offer from WorldCom, Inc. for their much-sought-after company. Over the weekend WorldCom increased its bid to $51 per share from the previous $41.50 a share.
Key to the deal is a special concession to British Telecommunications plc, the 20% owner of MCI that a year ago said it would merge with the No. 2 U.S. long-distance carrier. WorldCom will pay BT $51 per share in hard cash for the 20% stake. The rest of the MCI shareholders will receive the equivalent of $51 per share in WorldCom stock.
BT will announce that it is satisfied with the deal and will drop its merger plans with MCI.
Also apparently sealing the deal this morning is an agreement by WorldCom to retain MCI's top executives. Although WorldCom CEO Bernard Ebbers will keep the CEO designation, the board chairmanship of MCI WorldCom will go to current MCI CEO Bert Roberts.
Significantly, Tim Price, the head of MCI's main telecom operating subsidiary, will also retain a top spot in the new company. Price has been criticized for racking up losses in MCI's local market entry and for slow growth in its core long-distance business. But WorldCom appears to value Price's investment in local facilities in major U.S. urban markets – something that raised alarms among BT shareholders who could not see a return on that investment for many years.
Rival MCI bidder GTE Corp. appears to be acquiescing in the deal. Roberts said that in a phone call yesterday to GTE CEO Charles Lee, Lee made no attempt to counter WorldCom's higher offer. In fact, both Roberts and Ebbers went out of their way to praise GTE and BT for their cooperation in finally settling the matter.
Some uncertainties remain. The MCI-WorldCom merger must be approved by federal regulators, who may take a close look at the two companies' combined market share in Internet transport. Since the Justice Department is already attacking Microsoft Corp. for attempting to bundle its browser software with PC hardware sales, gaining its approval is expected to be the biggest hurdle.
WorldCom lobbyists have said the pace of growth in the Internet market makes it much less of an antitrust issue than the local telephone market, where GTE's monopoly status in many markets also could have raised concerns at the Justice Department.
Also left somewhat in limbo is the Concert venture for global network services between MCI and BT. The companies involved will announce that the venture will continue, with MCI WorldCom a non-exclusive distributor. But the amount of ongoing investment in the venture remains a question.
MCI network engineers and product managers will also have to spent considerable time planning integration with their opposite numbers at WorldCom. The integration work they've done with BT now may have been for naught.
