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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 17, 1999
WORLD ACCESS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-29782 58-2398004
(State of (Commission File No.) (I.R.S. Employer
Incorporation) Identification No.)
945 E. PACES FERRY ROAD, SUITE 2200
ATLANTA, GEORGIA 30326
(Address of principal executive offices, including zip code)
(404) 231-2025
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On August 17, 1999, World Access, Inc. ("World Access") entered into a
definitive merger agreement with FaciliCom International, Inc. ("FaciliCom").
FaciliCom, a privately owned company, is a leading facilities-based provider of
European and U.S. originated international long-distance voice, data and
Internet services. The combined company will have carrier grade switching and
transport network facilities located strategically throughout the U.S. and 13
European countries to facilitate entry into deregulating retail markets
worldwide.
Pursuant to the terms of the agreement, the shareholders of FaciliCom will
receive approximately $436 million in consideration, primarily in the form of
Convertible Preferred Stock, Series C ("Preferred Stock"). In addition, World
Access will assume $300 million of FaciliCom's 10.5% Senior Notes due 2008 (the
"FaciliCom Senior Notes").
The Preferred Stock bears no dividend and is convertible into shares of World
Access common stock at a conversion rate of $20.38 per common share (the
"Conversion Price"), subject to potential adjustment under certain
circumstances. If the closing trading price of World Access common stock exceeds
$20.38 per share for 60 consecutive trading days, the Preferred Stock will
automatically convert into a number of shares of common stock equal to the
number of shares of Preferred Stock subject to conversion multiplied by the
quotient of (i) $1,000 divided by (ii) the Conversion Price in effect on the
last trading day of such 60-day period. In addition, any shares of Preferred
Stock that have not been converted into common stock within three years
following the issue date of the Preferred Stock (the "Three Year Conversion
Date") will automatically be converted into a number of shares of common stock
equal to the number of shares of Preferred Stock subject to conversion
multiplied by the quotient of (i) $1,000 divided by (ii) the then current market
price as determined pursuant to the terms of the Certificate of Designation for
the Preferred Stock, subject to certain adjustments (the "Three Year Conversion
Price"). Notwithstanding the foregoing, (x) the Three Year Conversion Price may
not be less than $11.50, (y) if (A) the Three Year Conversion Price is less than
the market price on the issue date of the Preferred Stock and (B) the Nasdaq
Composite Index ("IXIC") on the close of business of the Three Year Conversion
Date is 85% or less than the IXIC on the close of business on the issue date of
the Preferred Stock (the difference between 100% and such percentage is referred
to as the "Market Correction Percentage"), then the Three Year Conversion Price
will be increased by a percentage equal to that portion of the Market Correction
Percentage in excess of 15%, and (z) the Three Year Conversion Price may not be
greater than the Conversion Price.
As long as at least 15% of the originally issued Preferred Stock is outstanding
(the "Minimum Preferred Stock Percentage"), the holders of the Preferred Stock
will be entitled to nominate and elect, voting as a separate series, four
directors to the World Access Board of Directors (the "Board") and shall not be
entitled to vote with respect to the election of any other directors.
Notwithstanding the foregoing, if (i) the common stock issuable upon conversion
of the Preferred Stock equals less than 20% of the outstanding shares of World
Access capital stock entitled to vote for the election of directors and (ii) the
outstanding Preferred Stock constitutes at least the Minimum Preferred Stock
Percentage, then the holders of Preferred Stock will have the right to elect,
voting as a separate series, such number of directors which, as a percentage of
the total number of members of the Board, is at least equal to the percentage of
all outstanding shares of World Access capital stock entitled to vote for the
election of directors held by such holders on an as converted basis.
If the Preferred Stock held by Armstrong International Telecommunications, Inc.,
Epic Interests, Inc., BFV Associates, Inc. and any of their respective
affiliates and initial transferees holding common stock issued upon such
conversion (collectively, the "Shareholders") is converted into World Access
2
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common stock, the Shareholders will be entitled to designate four persons to be
nominated and recommended by the Board for election to the Board, provided that,
on the record date, the Shareholders hold at least 15% of the common stock
issued upon conversion of the Preferred Stock (the "Minimum Common Stock
Percentage"). Notwithstanding the foregoing, if the shares of common stock held
by the Shareholders equals less than 20% of the total of all outstanding shares
of capital stock entitled to vote for the election of directors, then, so long
as the Minimum Common Stock Percentage is satisfied, the Shareholders will be
entitled to designate that number of persons to be nominated and recommended by
the Board for election to the Board so that the Shareholders would have,
assuming the election of such nominees, such number of persons nominated by them
which, as a percentage of the total number of members of the Board, is at least
equal to the percentage of all outstanding shares of capital stock entitled to
vote for the election of directors held by the Shareholders on the record date
for such vote. Except for certain other specified matters, the holders of the
Preferred Stock will vote on an as-converted basis with the holders of World
Access common stock.
The transaction is conditioned upon a majority of the holders of FaciliCom
Senior Notes allowing World Access to assume the FaciliCom Senior Notes, waive
any put rights triggered by the merger and make certain amendments thereto. The
merger is also subject to the approval of World Access stockholders and certain
regulatory agencies. Certain stockholders of World Access (including MCI
WorldCom, Brown Brothers Harriman and senior members of management) and the
Armstrong Group of Companies, FaciliCom's majority shareholder, have entered
into a Voting Agreement whereby they have committed to vote in favor of the
merger. The merger is expected to close in the fourth quarter of 1999 and will
be accounted for as a purchase transaction.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
99 Press Release, issued August 17, 1999.
</TABLE>
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf of the
undersigned hereunto duly authorized.
WORLD ACCESS, INC.
Date: August 19, 1999 By: /s/ MARTIN D. KIDDER
--------------------
Martin D. Kidder
Vice President and Controller
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
99 Press Release, issued August 17, 1999
</TABLE>
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(LOGO) WORLD (FCI LOGO)(R)
ACCESS FACILICOM
INTERNATIONAL(R)
RELIABLE, LOW-COST
CONNECTIVITY WORLDWIDE
WORLD ACCESS AND FACILICOM INTERNATIONAL AGREE TO MERGE
FaciliCom's State-of-the-Art Network Provides Foundation for European Retail,
Data and Internet Services
Combined 2000 Revenue Projected at $1.6 Billion
Combined 2000 EBITDA Projected at $170 Million, Including $35 Million
in Operating Synergies
COMPANIES TO SPONSOR CONFERENCE CALL TODAY AT 1:30 P.M. E.D.T.
Atlanta, Georgia - August 17, 1999 - World Access, Inc. (NASDAQ: WAXS)
and FaciliCom International, Inc. ("FaciliCom") announced today that they have
entered into a definitive merger agreement. FaciliCom, a privately owned
company, is a leading facilities-based provider of European and U.S. originated
international long-distance voice, data and Internet services. Together the
companies are expected to achieve 1999 revenue of approximately $1.2 billion,
including $450 million in FaciliCom revenue, the majority of which is originated
in Europe. The combined company will have carrier grade switching and transport
network facilities located strategically throughout the U.S. and 13 European
countries to facilitate entry into deregulating retail markets worldwide.
World Access expects the merger to be significantly accretive to EBITDA in 2000.
Pursuant to the terms of the agreement, the shareholders of FaciliCom
will receive approximately $436 million in consideration, primarily in the form
of Convertible Preferred Stock, Series C ("Preferred Stock"). The Preferred
Stock bears no dividend and is convertible into shares of World Access common
stock at a conversion rate of $20.38 per common share, subject to potential
adjustment under certain circumstances. If the closing trading price of World
Access common stock exceeds $20.38 per share for 60 consecutive trading days,
the Preferred Stock will automatically convert into common stock. Initially, the
holders of the Preferred Stock will be entitled to elect four new directors to
the World Access Board of Directors. Except for certain other specified matters,
the holders of the Preferred Stock will vote on an as-converted basis with the
holders of World Access common stock. In addition, World Access will assume $300
million of FaciliCom 10.5% Senior Notes due 2008.
The transaction is conditioned upon a majority of the holders of
FaciliCom Senior Notes allowing World Access to assume the Senior Notes, waive
any put rights triggered by the merger and make certain amendments thereto. The
merger is also subject to the approval of World Access shareholders and certain
regulatory agencies. Certain shareholders of World Access (including MCI
WorldCom, Brown Brothers Harriman and senior members of management) and the
Armstrong Group of Companies, FaciliCom's majority shareholder, have entered
into a Voting Agreement whereby they have committed to vote in favor of the
merger. The merger is expected to close in the fourth quarter of 1999 and will
be accounted for as a purchase transaction. Donaldson, Lufkin & Jenrette is
serving as advisor to World Access with respect to the transaction. FaciliCom is
being advised by Lehman Brothers.
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John D. Phillips, Chairman and Chief Executive Officer of World Access,
said, "The merger with FaciliCom positions World Access as a leading player in
the international long distance market. FaciliCom has invested over $200 million
during the past two years to establish one of the most extensive and highest
quality switching and transport networks in Europe. They have an extensive pool
of high-caliber management talent, both in the U.S. and abroad. We expect this
deal to have a significant positive impact on shareholder value, as it provides
us with a more robust network platform that is capable of handling significant
retail traffic volumes. We intend to strategically pursue the expansion of our
international retail operations by leveraging FaciliCom's network capacity and
through additional acquisitions of companies with significant retail traffic.
Additional retail traffic can be carried over FaciliCom's premier network
extremely efficiently."
Walter J. Burmeister, President and Founder of FaciliCom, commented,
"This transaction marks an enormous opportunity for FaciliCom. Together we have
the management and financial resources to leverage our extensive network and
rapidly expand our joint businesses, both in the retail market sector and data
services. In addition, World Access' significant traffic volume and strong
purchasing power should allow us to be more competitive in our traditional
wholesale business. Most importantly, together with World Access, we can build
upon our current success to deliver even greater value and quality to our
customers."
Mr. Phillips added, "We expect our combined carrier service revenue for
2000 to be in excess of $1.3 billion, with total revenue expected to exceed $1.6
billion. In addition, our operating teams have identified anticipated cost
synergies of approximately $35 million on an annual basis consisting of routing
changes to take advantage of the least cost routes for each country, savings in
leased line costs, redundancies in switching centers and administrative cost
savings. We also believe that the combined minute volumes of FaciliCom and World
Access will allow us to further reduce termination costs throughout the world,
thereby allowing us to generate additional market share increases by passing
along these reduced network costs to our customer base. We expect these
synergies to result in estimated EBITDA of approximately $170 million in 2000."
Headquartered in Washington, D.C., FaciliCom competitively provides
end-to-end communications services through its redundant digital network which
is capable of supporting voice and data services, including frame relay,
Internet Protocol (IP), asynchronous transfer mode (ATM) and multimedia
applications. This premier network supports a variety of ANSI and ITU signaling
interfaces including SS7 and C7. FaciliCom's network backbone consists of 17
switches in 14 countries, linked by an extensive fiber network encompassing tens
of millions of circuit miles, including holdings on transatlantic cable systems
such as TAT-12/13 and Globesystem (CANTAT-3, CANUS-1). European holdings include
the wholly-owned FCI-One cable and a high speed fiber optic ring connecting FCI
facilities in seven cities on Hermes Europe Railtel, as well as several other
trans-European cable systems (DK-S 18, UK-NL 14, ODIN and CIRCE).
As a result of the transaction, the Armstrong Group of Companies will
become the largest shareholder of World Access, with approximately 20% ownership
on a fully-diluted basis. Armstrong is a diversified, privately held group of
companies that own and operate cable television systems, independent telephone
companies, international telecommunications companies, real estate companies, a
residential and commercial security company and various other businesses.
Kirby J. Campbell, Chief Executive Officer of Armstrong, commented, "We
are very pleased to form this strategic partnership with World Access. The
combination of World Access and FaciliCom will be a powerful force in the
international telecommunications market, and we intend to be long-term
beneficiaries. We believe that the current market value of World Access is
significantly undervalued, and look forward to the long-term benefits that we
feel will be realized as the combined company executes its strategy to be a
leader in the international retail long-distance business."
WORLD ACCESS AND FACILICOM WILL SPONSOR A TELECONFERENCE TODAY AT 1:30
P.M., E.D.T. TO PARTICIPATE IN THIS TELECONFERENCE, INTERESTED PARTIES SHOULD
CALL 712-271-3636 AND ENTER PASS CODE WAXS. FOR THOSE WHO CANNOT LISTEN TO THE
LIVE BROADCAST, A REPLAY WILL BE AVAILABLE FOR 72 HOURS FOLLOWING THE CALL. TO
LISTEN TO THE REPLAY, CALL 1-800-294-5419 OR 402-220-9783.
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INVESTORS WILL ALSO HAVE THE OPPORTUNITY TO LISTEN TO THE CONFERENCE
CALL OVER THE INTERNET THROUGH STREETFUSION AT HTTP://WWW.STREETFUSION.COM. TO
LISTEN TO THE LIVE CALL, PLEASE GO TO THE WEBSITE AT LEAST 15 MINUTES EARLY TO
REGISTER, DOWNLOAD AND INSTALL ANY NECESSARY AUDIO SOFTWARE. THE REPLAY WILL BE
AVAILABLE IN THE 72 HOURS FOLLOWING THE CALL ON THE WORLD ACCESS WEBSITE
HTTP://WWW.WAXS.COM AS WELL AS ON HTTP://WWW.STREETFUSION.COM.
World Access provides international long distance services and
proprietary network equipment to the global telecommunications markets. The
World Access Telecommunications Group terminates international long distance
voice and data traffic in more than 200 countries through a combination of owned
or leased international network facilities, various international termination
agreements and resale arrangements with other international long distance
service providers. The World Access Equipment Group develops, manufactures and
markets intelligent multiplexers, digital microwave radio systems, digital
switches, billing and network telemanagement systems, cellular base stations,
fixed wireless local loop systems and other telecommunications network products.
For additional information regarding World Access and its divisions, please
refer to the Company's website at www.waxs.com.
THIS PRESS RELEASE MAY CONTAIN FINANCIAL PROJECTIONS OR OTHER
FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS
OF THE SECURITIES REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES WHICH MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY.
THESE RISKS INCLUDE: POTENTIAL INABILITY TO IDENTIFY, COMPLETE AND
INTEGRATE ACQUISITIONS; DIFFICULTIES IN EXPANDING INTO NEW BUSINESS
ACTIVITIES; DELAYS IN NEW PRODUCT DEVELOPMENTS OR INTRODUCTIONS; THE
POTENTIAL TERMINATION OF CERTAIN SERVICE AGREEMENTS OR THE INABILITY TO
ENTER INTO ADDITIONAL SERVICE AGREEMENTS; AND OTHER RISKS DESCRIBED IN
THE COMPANY'S SEC FILINGS, INCLUDING THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-3 (NO. 333-43497), ALL OF
WHICH ARE INCORPORATED BY REFERENCE INTO THIS PRESS RELEASE.
WORLD ACCESS CONTACT: NANCY L. DE JONGE MICHAEL F. MIES
(404-231-2025) DIRECTOR OF INVESTOR RELATIONS VICE PRESIDENT- FINANCE
& CORPORATE COMMUNICATIONS
& TREASURER
http://www.waxs.com
FACILICOM CONTACT: EDWARD M. REMINGTON JOHANNA L. KALLOCH
(202-496-1100) VICE PRESIDENT, MARKETING & MARKETING MANAGER
COMMUNICATIONS
http://www.facilicom.com
