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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
August 13, 1997
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Date of Report (Date of earliest event reported)
Phoenix Network, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-17909 84-0881154
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1687 Cole Boulevard, Golden, Colorado 80401
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(Address of principal executive offices)
(303) 205-3500
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On August 13, 1997, Phoenix Network, Inc. (the "Company")
announced that it had entered into a definitive agreement (the "Merger
Agreement") with MIDCOM Communications Inc. (collectively with its subsidiaries
"MIDCOM"), providing for the merger (the "Merger") of the Company with and into
MIDCOM. The announcement was made in a news release, a copy of which is filed
herewith as Exhibit 99.1. In the Merger, stockholders of the Company will
receive approximately 9.1 million shares of MIDCOM common stock in exchange for
all of the outstanding shares of Phoenix capital stock or approximately 0.28
shares of MIDCOM common stock per share of Phoenix common stock on an
as-if-converted to common stock basis. In addition, all outstanding options
and warrants to purchase shares of the Company's common stock will be converted
into options and warrants to purchase shares of MIDCOM's common stock.
The Company also announced on August 13, 1997, that it had
entered into definitive agreements (the "TNC Agreements") to purchase
substantially all of the assets of Trans National Communications, Inc. ("TNC")
and to acquire, pursuant to a plan of reorganization, substantially all of the
assets of Trans National Communications International, Inc. ("TNCI") in
exchange for approximately 5,164,000 shares of the Company's common stock and
the issuance of a promissory note in the amount of approximately $15.7 million
to Sprint Corporation ("Sprint") and Sprint Communication Company LP ("SLP")
(the "TNC Transactions"). If the Company proceeds with the TNC Transactions,
such transactions will be consummated immediately prior to the consummation of
the Merger. In that event, stockholders of the Company will receive
approximately 10.6 million shares of MIDCOM common stock for all of the
outstanding shares of Phoenix capital stock or approximately 0.28 shares of
MIDCOM common stock per share of Phoenix common stock on an as-if-converted to
common stock basis.
The Merger is subject to numerous conditions, including the
following:
1. MIDCOM shall have raised and received at or before
the closing of the Merger at least $20 million of debt and/or equity capital on
terms reasonably acceptable to MIDCOM and the Company;
2. The average closing bid price per share of MIDCOM
common stock for the ten trading days prior to the closing shall not be less
than $5.75 nor more than $11.75;
3. Each of the parties shall have obtained fairness
opinions prior to the closing of the Merger concluding that the Merger is fair
from a financial point of view to such party and its stockholders; and
4. Regulatory and stockholder approvals, and other
conditions set forth in the Merger Agreement.
The TNC Transactions are subject to numerous conditions,
including the following:
1. TNC's accounts payable, short-term payables and
accrued expenses owed to Sprint and SLP shall not exceed $5.5 million;
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2. Satisfactory due diligence review of TNC and TNCI by
MIDCOM;
3. All conditions precedent to the obligations of the
Company and MIDCOM to consummate the Merger on the terms contemplated by the
Merger Agreement shall have been satisfied; and
4. Regulatory approval, receipt of required third party
consents, and other conditions set forth in the TNC Agreements.
The Company currently is targeting the Fourth Quarter of 1997
to consummate the Merger and the TNC Transactions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 News Release, released on August 13, 1997,
announcing the Merger and the TNC Transactions.
99.2 News Release, released on August 20, 1997,
providing details of the Merger and the TNC Transactions.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: September 2, 1997 Phoenix Network, Inc.
By: /s/ Wallace M. Hammond
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Wallace M. Hammond, President
and Chief Executive Officer
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
99.1 News Release, released on August 13, 1997, announcing the
Merger and the TNC Transactions.
99.2 News Release, released on August 20, 1997, providing details
of the Merger and the TNC Transactions.
</TABLE>
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EXHIBIT 99.1
News Release For Immediate Release
August 13, 1997
Contact: Teresa C. Stackpole Monica Williamson
Director, Corporate Communications Director, Investor Relations
MIDCOM Communications, Inc. Phoenix Network, Inc.
(206) 628-6115 (800) 448-0804
MIDCOM AND PHOENIX NETWORK ANNOUNCE MERGER AGREEMENT
AUGUST 13, 1997--SOUTHFIELD, MI; GOLDEN, CO:--MIDCOM Communications Inc.
(NASDAQ:MCCI) and Phoenix Network, Inc. (AMEX:PHX) today announced that they
have signed a definitive agreement to merge the two companies. The merger is
expected to close by year-end, subject to the approvals of the shareholders of
both companies, the receipt of governmental approvals and subject to MIDCOM
raising at least $20.0 million in financing prior to closing. On August 13,
1997 the companies executed a definitive agreement to merge Phoenix Network
into MIDCOM.
"We believe this merger will create a number of synergies which should result
in significant savings and thereby enable us to reach profitability earlier
than previously projected," said MIDCOM president and chief executive officer,
William H. Oberlin. "We expect this merger to be accretive to earnings in both
the short and long term. The addition of Phoenix Network's minutes will result
in lower unit costs on our network and provide a broader base support for our
overhead, as well as a larger pool of customers to cross- sell."
For the six months ended June 30, 1997, Phoenix Network reported revenues of
$41.3 million and MIDCOM reported revenue of $49.4 million, resulting in an
annualized revenue run rate of over $180.0 million for the combined company.
"We are very pleased about the merger and believe we have joined forces with an
innovative, fast-growing company," said Wallace M. Hammond, president and
chief executive officer for Phoenix Network. "From our perspective, the merger
also provides us with an impressive national switched network and a more
diverse sales strategy."
Phoenix Network currently has three DMS 250 long distance switches located in
Minneapolis, Colorado Springs and Phoenix, adding three new
facilities-supported markets to MIDCOM's current network which includes six DMS
250/500 local/long distance switching systems located in Seattle, Los Angeles,
Dallas, Chicago, New York and Atlanta. Phoenix also announced on August 13,
1997 that it has reached an agreement to purchase Trans National Communications
(TNC), a leading provider of long distance affinity marketing programs with
$22.2 million in revenue for the six months ended June 30, 1997. The TNC
acquisition is subject to MIDCOM's due diligence.
--more--
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News Release
MIDCOM/Phoenix Merger, August 13, 1997
Page two
The merger of MIDCOM and Phoenix should be accounted for as a pooling of
interests, while the Phoenix acquisition of TNC will be accounted for as a
purchase. Under the terms of the agreement, MIDCOM will acquire all outstanding
shares of Phoenix common stock for 9.1 million shares of MIDCOM common stock.
The agreement also specifies that, if the TNC acquisition is completed, MIDCOM
will provide approximately 1.5 million additional shares of its common stock to
Phoenix as well as assume approximately $15.7 million of debt. In addition,
Wallace Hammond and Phoenix board member, Charles C. McGettigan, will be
appointed to MIDCOM's board of directors. Hammond will also join the MIDCOM
management team.
Statements in this news release concerning future results or expectations,
including growth in sales, improving margins, cost savings and other benefits
resulting from the merger with Phoenix Network, completion of the merger and
return to profitability are forward-looking statements. Actual results,
performance, cost-savings, or developments could differ materially from those
expressed or implied by such forward-looking statements as a result of known
and unknown risks, uncertainties and other factors including those identified
in the company's Annual Report on Form 10-K and those described from time to
time in the company's other filings with the Securities and Exchange
Commission, press releases and other communications.
Founded in 1989, MIDCOM Communications Inc. provides a broad range of
telecommunications services to small and medium-sized businesses nationwide.
The company has regional offices located throughout the nation and currently
invoices approximately 100,000 customer locations per month.
Phoenix Network, Inc. is an interexchange carrier (IXC) which, in addition to
its core long distance, offers Internet access, enhanced fax broadcast
services, international call-back, conference calling, travel cards, debit
cards, custom invoices, management reports and a variety of other products and
services. Phoenix Network's World Wide Web address is http://www.phoenixnet.com.
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EXHIBIT 99.2
News Release
For Immediate Release
August 20, 1997
Contact: Monica Williamson
Phoenix Network Investor Relations
(800) 448-0804
PHOENIX NETWORK REPORTS DETAILS OF MIDCOM MERGER
AUGUST 20, 1997--GOLDEN, CO--Phoenix Network, Inc. (AMEX: PHX) announced today
additional details relating to its pending merger with MIDCOM Communications,
Inc., (NASDAQ:MCCI), which was previously announced on August 13, 1997. Phoenix
also announced on August 13, 1997 that it has reached a definitive agreement to
purchase Trans National Communications (TNC), a leading provider of long
distance affinity marketing programs with $22.2 million in revenues for the six
months ended June 30, 1997.
Upon completion of the Phoenix/MIDCOM transaction, MIDCOM will acquire all of
the outstanding shares of Phoenix Network common stock (currently approximately
32.0 million shares on a diluted basis, excluding options and warrants) for
approximately 9.1 million shares of MIDCOM common stock. If Phoenix
consummates its acquisition of TNC prior to the closing of the Phoenix/MIDCOM
merger, MIDCOM will acquire currently approximately 37.0 million shares of
Phoenix common stock for approximately 10.6 million shares of MIDCOM common
stock. MIDCOM will assume Phoenix's outstanding stock options and warrants at
closing.
Phoenix's and MIDCOM's respective obligations to consummate the merger are
subject to conditions that MIDCOM's average stock price prior to the closing
shall not be less than $5.75 or greater than $11.75.
Phoenix Network, Inc. is an inter-exchange carrier (IXC) which, in addition to
its core long distance, offers Internet access, enhanced fax broadcast
services, international call-back, conference calling, travel cards, debit
cards, custom invoices, management reports, and a variety of other products and
services. Phoenix Network's World Wide Web address is
<http://www.phoenixnet.com>.
Founded in 1989, MIDCOM Communications Inc. provides a broad range of
telecommunications services to small and medium-sized businesses nationwide.
The company has regional offices located throughout the nation and currently
invoices approximately 100,000 customer locations per month.
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