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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): October 1, 1997
WORLDCOM, INC.
(Exact Name of Registrant as Specified in its Charter)
Georgia 0-11258 58-1521612
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification Number)
Incorporation)
515 East Amite Street
Jackson, Mississippi 39201-2702
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (601) 360-8600
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ITEM 5. OTHER EVENTS.
(a) On October 1, 1997 WorldCom, Inc. ("WorldCom" or the "Company")
announced that it intends to commence an exchange offer to acquire all of the
outstanding shares of MCI Communications Corporation ("MCI") for $41.50 of
WorldCom common stock per MCI share, subject to adjustment. Following
consummation of the exchange offer, WorldCom would effect a second-step merger
with all remaining MCI stockholders receiving the same per share consideration.
On October 1, 1997, the Company issued a press release announcing the
offer. A copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference. Consummation of the exchange offer would be
subject to certain conditions as described in the press release.
(b) Also on October 1, 1997, the Company announced the execution of a
definitive agreement and plan of merger with Brooks Fiber Properties, Inc.
("Brooks"). Under the terms of the agreement, structured to qualify as a
pooling of interests transaction, each share of Brooks common stock would be
exchanged for 1.65 shares of WorldCom common stock, subject to adjustment.
On October 1, 1997, the Company issued a press release announcing the
agreement with Brooks. A copy of the press release hereto as Exhibit 99.2 and
is incorporated herein by reference. Consummation of the merger will be subject
to certain conditions as described in the press release.
ITEM 7 (c) EXHIBITS.
The following exhibits are filed herewith in accordance with Item 601
of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Press release dated October 1, 1997
announcing the Company's intention
to commence an offer to acquire all
of the outstanding shares of MCI.
99.2 Press release dated October 1, 1997
announcing the execution of a
definitive agreement and plan of
merger between WorldCom and Brooks.
</TABLE>
2
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SIGNATURES
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.
WORLDCOM, INC.
By: /s/ Charles T. Cannada
-----------------------------------------
Charles T. Cannada
Senior Vice President and Assistant
Secretary
October 2, 1997
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
99.1 Press release dated October 1, 1997 announcing the
Company's intention to commence an offer to acquire
all of the outstanding shares of MCI.
99.2 Press release dated October 1, 1997 announcing the
execution of a definitive agreement and plan of merger
between WorldCom and Brooks.
</TABLE>
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EXHIBIT 99.1
FOR MEDIA: FOR INVESTORS:
Josh Howell, (601) 360-8750 Gary Brandt, (601) 360-8544
Steve Ingish, (402) 231-3423
Mark Weeks, 011-44-171-570-5700
Joele Frank, Abernathy/MacGregor, (212) 371-5999
FOR IMMEDIATE RELEASE
WORLDCOM OFFERS $41.50 IN STOCK PER MCI SHARE
TOTAL TRANSACTION VALUED AT APPROXIMATELY $30 BILLION
41% PREMIUM OVER CURRENT MCI STOCK PRICE
ACCRETIVE TO WORLDCOM WITH SIGNIFICANT SYNERGIES ANTICIPATED
ACCELERATES LOCAL COMPETITION
Jackson, Miss., October 1, 1997 -- WorldCom, Inc. (NASDAQ: WCOM)
announced today that it will be commencing an exchange offer to acquire all of
the outstanding shares of MCI Communications Corporation (NASDAQ: MCIC) for
$41.50 of WorldCom common stock per MCI share. Following consummation of the
exchange offer, WorldCom will effect a second-step merger with all remaining
MCI stockholders receiving the same per share consideration. WorldCom's offer
represents a 41% premium to MCI's closing stock price on September 30, 1997.
The transaction is valued at approximately $30 billion -- a premium of $9
billion to the market's current valuation of the proposed acquisition of MCI by
British Telecom. The transaction will be accounted for as a purchase and will
be tax-free to MCI's stockholders.
The transaction is expected to be accretive to WorldCom's earnings by
as much as 22% in the first year after closing with synergies of approximately
$2.5 billion in the first year, growing to approximately $5 billion in the
fifth year. These synergies are anticipated to result from better utilization
of the combined network and other operational savings. Because WorldCom has
already established extensive domestic local network facilities, a WorldCom
combination with MCI will achieve significantly higher synergies than possible
in British Telecom's acquisition of MCI.
WorldCom's combination with MCI will create one of the world's premier
communications companies with over $30 billion in revenues. The combination
will enhance WorldCom's position as a leading provider of one-stop-shopping
communication services -- offering a full range of local, long distance,
Internet and international services.
The actual number of shares of WorldCom common stock to be exchanged
for each MCI share in the exchange offer will be determined by dividing $41.50
by the 20-day average of the high and low sales prices for WorldCom common
stock prior to the closing of the exchange offer, but will not be less than
1.0375 shares (if WorldCom's average stock price exceeds $40) or more than
1.2206 shares (if WorldCom's average stock price is less than $34).
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Mr. Bernard J. Ebbers, president and chief executive officer of
WorldCom, said, "The financial benefits of this offer are compelling for the
stockholders of both MCI and WorldCom. MCI's stockholders will immediately see
the superior benefits of WorldCom's offer -- a higher premium, powerful
synergies and ownership in the best performing telecommunications stock over
the past decade. This is just one of the indisputable reasons why a merger with
WorldCom is superior for MCI's stockholders. While MCI and British Telecom are
both great companies, the fit between them just doesn't work without sufficient
local network assets in place. Because WorldCom has those assets in place, far
greater synergies are possible. It is clearly a superior fit and, as a result,
a superior offer."
In addition, WorldCom announced today a definitive agreement to
acquire Brooks Fiber Properties, Inc. This acquisition significantly increases
the number of WorldCom local facilities and further reinforces WorldCom's
opportunity for synergies in the WorldCom-MCI combination.
Commenting on the role that the merger of WorldCom and MCI might play
in bringing the benefits of competition to U.S. customers, Mr. Ebbers
continued, "This combination helps fulfill the intent of the Telecommunications
Act by enhancing competition. Together, WorldCom and MCI will have the capital,
marketing abilities and state-of-the-art network to compete more effectively
against the incumbent carriers, domestically and abroad. WorldCom and MCI share
similar legacies: pioneering the introduction of competition to the
telecommunications marketplace and histories of innovation, agility and growth.
Indeed, our two companies are the paradigm for the American entrepreneurial
spirit -- we have both forged significant inroads into industries long
dominated by giants, and have been among the first to offer consumers a choice
of providers for local, long distance, data, and other services."
Consummation of the WorldCom exchange offer will be conditioned on:
(1) receipt of Federal Communications Commission approval of a voting trust to
be established by WorldCom and antitrust clearance of the transaction, (2) the
MCI Rights Plan being inapplicable to the exchange offer, (3) MCI's
stockholders having voted against the British Telecom-MCI acquisition
agreement, (4) WorldCom's stockholders having approved (by a majority of those
voting) the issuance of WorldCom common stock in the exchange offer, (5) a
majority of MCI's shares having been tendered in the exchange offer and (6)
other conditions substantially the same as those contained in the British
Telecom-MCI acquisition agreement.
Salomon Brothers Inc is acting as financial advisor to WorldCom.
MacKenzie Partners, Inc. is the information agent for the exchange offer.
A detailed description of the offer is included in a preliminary
prospectus being filed with the Securities and Exchange Commission.
Attached is a letter WorldCom sent today to MCI's Chairman:
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October 1, 1997
Mr. Bert C. Roberts, Jr.
Chairman and Chief Executive Officer
MCI Communications Corporation
1801 Pennsylvania Avenue, NW
Washington, DC 20006-3606
Dear Mr. Roberts:
I am writing to inform you that this morning WorldCom is publicly
announcing that it will be commencing an offer to acquire all the outstanding
shares of MCI for $41.50 of WorldCom common stock per MCI share. The actual
number of shares of WorldCom common stock to be exchanged for each MCI share in
the exchange offer will be determined by dividing $41.50 by the 20-day average
of the high and low sales prices for WorldCom common stock prior to the closing
of the exchange offer, but will not be less than 1.0375 shares (if WorldCom's
average stock price exceeds $40) or more than 1.2206 shares (if WorldCom's
average stock price is less than $34).
Our offer represents a 41% premium to MCI's closing stock price on
September 30, 1997. The transaction is valued at approximately $30 billion -- a
premium of $9 billion to the market's current valuation of the proposed
acquisition of MCI by British Telecom. The transaction will be accounted for as
a purchase and will be tax-free to MCI's stockholders.
The transaction is expected to be accretive to WorldCom's earnings by
as much as 22% in the first year after closing with synergies of approximately
$2.5 billion in the first year, growing to approximately $5 billion in the
fifth year. These synergies are anticipated to result from better utilization
of the combined network and other operational savings. Because WorldCom has
already established extensive domestic local network facilities, a WorldCom
combination with MCI will achieve significantly higher synergies than possible
in British Telecom's acquisition of MCI.
WorldCom and MCI share similar legacies: pioneering the introduction
of competition to the telecommunications marketplace and histories of
innovation, agility and growth. Indeed, these two companies are the paradigm
for the American entrepreneurial spirit -- we have both forged significant
inroads into industries long dominated by giants, and have been among the first
to offer consumers a choice of providers for local, long distance, data, and
other services. Combined, we will accelerate competition -- especially in local
markets -- by creating a company with the capital, marketing abilities and
state-of-the-art networks to compete more effectively against the incumbent
network carriers, domestically and abroad.
Unlike British Telecom, WorldCom is already a seasoned competitor in
the U.S. local market with an established presence in 52 local markets.
WorldCom's local network both accelerates MCI's local strategy and results in
significant savings for the combined company. WorldCom's announcement today of
the Brooks Fiber Properties acquisition significantly increases the number of
WorldCom local facilities and further reinforces WorldCom's opportunity for
synergies in the WorldCom-MCI combination. Creating a stronger competitor in
the local market helps fulfill the intent of the Telecommunications Act of
1996.
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Combining WorldCom's pan-European fiber network in 12 European cities
with MCI's international operations will create a leading alternative provider
of telecommunications services in key markets abroad. WorldCom and MCI will
bring complementary skills to compete in rapidly deregulating global markets.
MCI's stockholders will benefit from the opportunity to own an
entrepreneurial telecommunications operator with a proven track record of
shareholder value creation. MCI's stockholders will not only achieve a higher
valuation today but will also be better positioned to realize higher returns in
the future through ownership in the combined company. Historical returns
realized by WorldCom's stockholders over the past decade have exceeded those
realized by investors in all other U.S. telecommunications companies. Since the
end of 1989, WorldCom has provided investors with a total compound annual
return of 55.8% compared to 4.3% for MCI and 9.4% for British Telecom. Our
proposal will result in MCI's stockholders owning approximately 45% of the
combined company -- while under the proposed acquisition of MCI by British
Telecom, your stockholders would only own approximately 25% of the combined
company.
WorldCom has a proven track record of successfully integrating
acquisitions and has completed more than 40 transactions over the past five
years. These transactions have been accomplished smoothly with minimal
disruption to the employee base. As in our other significant business
combinations, we expect that MCI's management would be an important part of the
combined company and we would welcome members of MCI's Board to our Board.
Our exchange offer can be closed promptly without the need for any
consent from British Telecom. The roadmap to a timely completion of WorldCom's
exchange offer includes the following:
Establish Voting Trust. WorldCom will establish a voting trust, which
we expect will be approved by the Federal Communications Commission
(FCC) within a matter of weeks, that will permit the exchange offer to
be consummated prior to receiving final approvals from the FCC and
state Public Utility Commissions (PUCs). We are submitting the
applicable FCC filings today and will file with all PUCs shortly.
Obtain Antitrust Clearance. Clearances by the U.S. and other antitrust
authorities are the only regulatory conditions to the exchange offer,
other than FCC approval of a voting trust. We are filing with the U.S.
antitrust authorities today and will be filing with other authorities
shortly. We are confident that we will obtain clearance no later than
the first quarter of 1998.
Amend Rights Plan. We request that you amend your Rights Plan to
permit MCI's stockholders to participate in the exchange offer. We
know MCI has the ability to do this.
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Solicit Stockholder Approvals. We will be filing materials with the
Securities and Exchange Commission (SEC) promptly to solicit votes of
MCI's stockholders against the proposed acquisition of MCI by British
Telecom and to obtain the approval of WorldCom's stockholders for the
issuance of WorldCom common stock in the exchange offer. To obtain the
approval of WorldCom's stockholders, WorldCom needs to obtain only the
favorable vote of a majority of the shares voting (which is the same
stockholder vote that British Telecom is required to obtain). We are
highly confident that our stockholders will approve this transaction.
Model Other Offer Conditions to British Telecom's. We have structured
the other conditions to our offer to be substantially the same as
those contained in your agreement with British Telecom. In particular,
we have not conditioned our offer on the absence of a material adverse
change on MCI's results of operations or financial condition.
We are confident that the WorldCom exchange offer can be completed no
later than the first quarter of 1998. Since British Telecom's acquisition of
MCI cannot be closed until the end of 1997, at the earliest, and because of the
need for SEC clearance and stockholders meetings, our exchange offer can close
on essentially the same timetable as the proposed acquisition by British
Telecom. We will consummate a second-step merger between MCI and a subsidiary
of WorldCom at the same per share consideration as that provided for in the
WorldCom exchange offer as soon as possible following consummation of the
exchange offer. This merger could be completed without British Telecom's
consent on October 1, 1998, when British Telecom's class vote expires.
As you are aware, if MCI's stockholders reject the British Telecom
acquisition, your agreement with British Telecom permits you to avoid paying
British Telecom a $450 million termination fee even if there is a subsequent
transaction with WorldCom. Even though our offer and merger can close without
British Telecom's consent, as outlined above, we believe it is in the best
interests of all parties to come to a three-way negotiated agreement providing
for the merger of WorldCom and MCI. We believe that a negotiated merger
transaction (as opposed to our exchange offer) could be structured to be
accounted for as a pooling-of-interests, which would be even more beneficial to
the stockholders of MCI, British Telecom and WorldCom than the purchase
transaction proposed.
You should understand that in connection with any negotiated
transaction, we would enter into a merger agreement with terms substantially
similar to the existing British Telecom-MCI acquisition agreement, including no
material adverse change condition and payment of a $750 million termination fee
if WorldCom's stockholders fail to approve the WorldCom-MCI merger.
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We believe that our proposed transaction is in the best interests of
the stockholders of MCI. MCI's stockholders would receive a substantial premium
and significantly more upside potential in a combination with WorldCom. We look
forward to meeting with you and would welcome the opportunity to present our
offer directly to you and your Board.
Sincerely,
/s/ [Bernard J. Ebbers]
Mr. Bernard J. Ebbers
President and Chief Executive Officer
WorldCom, Inc.
cc: MCI Board of Directors
WorldCom is a global telecommunications company. Operating in more than 50
countries, the company is a premier provider of facilities-based and fully
integrated local, long distance, international and Internet services.
WorldCom's subsidiary, UUNET Technologies, Inc., is an international provider
of Internet services with over 1,000 Points of Presence (POPs) throughout the
United States and in Canada, Europe and the Asia-Pacific region. WorldCom's
World Wide Web address is http://www.wcom.com. The common and depository shares
of WorldCom trade on the NASDAQ National Market (US) under the symbols WCOM and
WCOMP, respectively.
# # #
Information contained in this release with respect to the expected financial
impact of the proposed transaction is forward-looking. These statements
represent the company's reasonable judgment with respect to future events and
are subject to risks and uncertainties that could cause actual results to
differ materially. Such factors include, but are not limited to, material
adverse changes in economic and competitive conditions in the markets served by
the companies, material adverse changes in the business and financial condition
of either or both companies and their respective customers, uncertainties
concerning technological changes and future product performance, and
substantial delay in the expected closing of the transaction.
SATELLITE UPLINK FOR WORLDCOM B-ROLL:
Wednesday, October 1, 1997
09:00 -09:30 AM EDT
C-Band Galaxy 6; Transponder 17
Downlink frequency: 4040
Wednesday, October 1, 1997
12:30 - 1:00 PM EDT
C-Band Telstar 5; Transponder 15
Downlink frequency: 4000
If you have any technical questions or problems with the satellite feed for
WorldCom B-Roll, please call Bret Curran at (212) 627-5622.
<PAGE> 1
EXHIBIT 99.2
CONTACTS:
Media: Investors:
Josh Howell Gary Brandt
(601) 360-8750 (601) 360-8544
FOR IMMEDIATE RELEASE
WORLDCOM AND BROOKS FIBER ANNOUNCE MERGER
EXPANDS WORLDCOM'S LOCAL PRESENCE FROM 52 METROPOLITAN AREAS TO 86
ADDS SIGNIFICANT LOCAL ACCESS EXPERTISE, LOCAL FIBER NETWORKS AND SWITCHING
CAPACITY
Jackson, Miss., October 1, 1997 - WorldCom, Inc. (NASDAQ: WCOM) and Brooks
Fiber Properties, Inc. (NASDAQ: BFPT) today announced that the two companies
have executed a definitive agreement and plan of merger. Under the terms of
the agreement, structured to qualify as a pooling of interests transaction,
each share of Brooks common stock will be exchanged for 1.65 shares of WorldCom
common stock. As of yesterday's closing, the merger consideration for Brooks
stock is approximately $2.4 billion plus outstanding debt obligations.
The agreement and plan of merger have been approved unanimously by the Board of
Directors of each company. The merger closing is expected to occur as soon as
possible following approval and adoption of the Plan of Merger by Brooks
shareholders at a special shareholders' meeting.
The merger will expand the number of all fiber optic, state-of-the-art local
networks and switching facilities operated in the U.S. by WorldCom from 52 to
86. The majority of the 44 Brooks' markets (34) are in cities that WorldCom
did not have local facilities already established.
"The merger will greatly expand our total number of local networks and advance
our entrance into more secondary cities by as much as two years in an accretive
manner," said Bernard J. Ebbers, president and CEO of WorldCom.
"Additionally, through this merger we gain a highly trained and professional
group of sales and technical personnel with an entrepreneurial spirit that
matches our own. It is that spirit that has driven Brooks' swift growth over
the past few years," said Mr. Ebbers. "We anticipate the contribution of the
1,600 or so employees from Brooks will prove to be extremely beneficial as we
continue to grow as a full service communications provider."
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Founded in 1993, Brooks has grown quickly to become a leading facilities-based
provider of competitive local telecommunications services, with an emphasis on
secondary markets, by aggressively pursuing switched services opportunities,
further building out existing systems and expanding service offerings. Like
WorldCom, Brooks' goal has been to offer local dial tone, switched access
termination and origination services, as well as Centrex-type offerings and
desktop products in all of its markets. The company's sales focus is
telecommunications-intensive business, government and institutional customers,
as well as some residential customers.
Brooks' anticipated revenue growth rate for the next few years is in excess of
WorldCom's stand alone rate. Accordingly, the merger will be additive to
WorldCom's revenue growth. "We fully expect that the added networks and
switching capacity will greatly benefit WorldCom as we continue to look to a
bundled product offering for the bulk of our revenue growth in the future,"
said Mr. Ebbers.
Consummation of the Brooks merger is subject to the satisfaction of certain
conditions, including the expiration or termination of any applicable waiting
periods under the Hart-Scott-Rodino Act, the receipt of other required
regulatory approvals and the absence of certain material adverse changes.
Consummation of the merger is also subject to the approval and adoption of the
Brooks Merger Agreement by stockholders of Brooks. The closing of the merger
is expected to occur as soon as practicable after satisfaction of the
conditions set forth in the Brooks Merger Agreement.
Brooks Fiber Properties, Inc., headquartered in St. Louis, Missouri, is a
leading full service provider of competitive local telecommunications services
in cities across the United States. With networks operational or under
construction in 44 U.S. cities, the company provides its customers with
advanced and reliable high-capacity voice, video, data and other enhanced
telecommunications services.
WorldCom is a global telecommunications company. Operating in more than 50
countries, the company is a premier provider of facilities-based and fully
integrated local, long distance, international and Internet services.
WorldCom's subsidiary, UUNET Technologies, Inc., is an international provider
of Internet services with over 1,000 Points of Presence (POPs) throughout the
United States and in Canada, Europe and the Asia-Pacific region. WorldCom's
World Wide Web address is http://www.wcom.com. The common and depository
shares of WorldCom trade on the NASDAQ National Market (US) under the symbols
WCOM and WCOMP, respectively.
Except for historical information, this press release contains forward looking
statements that involve risks and uncertainties, including the satisfaction of
the conditions to the transaction and the successful integration of WorldCom
and Brooks, competitive and regulatory risk associated with the
telecommunications industry, and other risks detailed from time to time in
various regulatory filing by both companies. Actual results, events and
performance may differ materially.
# # #
