<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): December 8, 1999
VIATEL, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 000-21261 13-3787366
(State or Other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
Viatel, Inc.
685 Third Avenue
New York, New York 10017
(Address of Principal Executive Offices, Including Zip Code)
Registrant's telephone number, including area code: 212-350-9200
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On December 8, 1999, pursuant to an Agreement and Plan of Merger dated
as of August 27, 1999 (the "Merger Agreement"), Viatel Acquisition Corp.
("Merger Sub"), a Delaware corporation and wholly-owned subsidiary of Viatel,
Inc. (the "Company"), merged with and into Destia Communications, Inc.
("Destia"), a Delaware corporation (the "Merger"). Under the terms of the
Merger Agreement, Destia stockholders will receive 0.445 of a share of the
Company's common stock in exchange for each share of Destia common stock
outstanding at the effective time of the Merger. As a result of the
consummation of the Merger, Destia continued as the surviving corporation and
has become a wholly-owned subsidiary of the Company. Based upon the 32,247,461
shares of Destia common stock outstanding as of the closing date, Viatel
expects to issue approximately 14,350,123 shares of Viatel common stock in
connection with the Merger.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Businesses Acquired.
The audited financial statements of the business acquired, Destia
Communications, Inc. as of December 31, 1998 and 1997, and for the
years then ended, required by this item are incorporated herein by
reference to the Form S-4 Registration Statement (No. 333-89143),
filed with the Securities and Exchange Commission on October 15,
1999. The financial statements of Destia Communications, Inc. as of
September 30, 1999 and for the periods ended September 30, 1999 and
1998 are included in the pro forma financial statements (and
footnotes thereto) filed as Exhibit 99.2 to this Report.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item is
contained in the pro forma financial statements (and footnotes
thereto) filed as Exhibit 99.2 to this Report.
(c) Exhibits.
The following exhibits are filed with this Report.
Exhibit No. Description.
2.1 Agreement and Plan of Merger by and among Viatel, Inc.,
Viatel Acquisition Corp. and Destia Communications, Inc.,
dated as of August 27, 1999 (incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form 8-K,
dated August 30, 1999).
23.1 Consent of Arthur Andersen LLP.
2
<PAGE>
99.1 Press Release of Viatel, Inc., dated December 8, 1999.
99.2 Pro Forma Financial Statements.
3
<PAGE>
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.
VIATEL, INC.
Date: December 17, 1999 By: /s/ James P. Prenetta
---------------------------------
Name: James P. Prenetta
Title: Vice President and General
Counsel
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description.
2.1 Agreement and Plan of Merger by and among Viatel, Inc.,
Viatel Acquisition Corp. and Destia Communications, Inc.,
dated as of August 27, 1999 (incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form 8-K,
dated August 30, 1999).
23.1 Consent of Arthur Andersen LLP.
99.1 Press Release of Viatel, Inc., dated December 8, 1999.
99.2 Pro Forma Financial Statements.
5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Viatel, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated February 2, 1999 relating to the financial
statements of Destia Communications, Inc. included in the registration
statement on Form S-4 (No. 333-89143) and to all references to our Firm
included in or made part of such registration statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
New York, New York
December 16, 1999
<PAGE>
FOR IMMEDIATE RELEASE
Contact: Glenn K. Davidson, Vice President, Corporate Communications & External
Affairs +1-212-350-9214, or [email protected]
VIATEL COMPLETES ACQUISITION OF DESTIA COMMUNICATIONS
NEW YORK, NY (DECEMBER 8, 1999) - VIATEL, INC. (NASDAQ: VYTL) today announced
that it has completed its acquisition of DESTIA COMMUNICATIONS, INC. (NASDAQ:
DEST).
Concerning the acquisition, Michael J. Mahoney, Viatel's Chairman, President and
Chief Executive Officer, stated: "The completion of this merger puts Viatel
firmly on track for meeting its objective of becoming Europe's premier provider
of integrated telecommunications services. The merger capitalizes on Viatel's
celebrated Circe Pan-European Network, its brand awareness in Europe, and its
solid management as well as on Destia's sizeable customer base, its innovative
product work, its marketing prowess, and its strong management and back office
operations."
OPERATIONAL HIGHLIGHTS OF THE COMBINED COMPANY INCLUDE:
- - A global network that includes:
-- Europe's largest, state-of-the-art, fresh-dig, cross-border, broadband
network,
-- Trans-Atlantic capacity,
-- State-of-the-art international network operations centers, and
-- Network points of interconnection in over 200 cities;
- - Operations in 9 European countries and the United States;
- - Over 700,000 customers worldwide;
- - A broad portfolio of telecommunications services to carriers, ISPs,
businesses and individual consumers; and
FINANCIAL HIGHLIGHTS OF THE COMBINED COMPANY INCLUDE:
- - Market capitalization of approximately US$2.0 billion; and
- - Latest quarter annualized consolidated revenues of over US$600.0 million.
In the merger, each share of Destia Common Stock is being converted into 0.445
share of common stock of Viatel, Inc. Effective today, Destia Communications'
stock will no longer be traded on the Nasdaq Stock Market. The combined company
will have approximately 47 million outstanding shares.
Concurrent with the closing of its acquisition of Destia, Viatel also completed
its exchange offer whereby it exchanged $686.03 principal amount of its 11.50%
senior dollar notes due 2009 and US$71.24 in cash (of which US$20 of the cash
payment represented a consent fee) for each 11.0% senior discount notes due 2008
of Destia Communications. All of Destia's 11.0% senior discount notes were
tendered for exchange. Further, Viatel completed a private placement of
approximately US$64 million of 11.50% notes, the proceeds of which will be used
to meet the company's obligations under the exchange offer and to purchase
collateral for the 11.50% notes.
-more-
<PAGE>
The combined company is an integrated provider of communications services -
including voice, data, Web access and bandwidth - in over 230 countries and
territories worldwide. Its customers include individual consumers, businesses,
Internet service providers, other carriers and resellers. The Company currently
operates a global network which includes one of the largest pan-European
networks, international gateways in London and New York, state-of-the-art
international network operations centers, network points of interconnection in
over 200 cities, and a direct sales force throughout Western Europe.
# # #
CERTAIN MATTERS DISCUSSED IN THIS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, INCLUDING CONSTRUCTION RISKS AND OTHER RISKS
DETAILED FROM TIME TO TIME IN EACH COMPANY'S REGISTRATION STATEMENTS AND REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THOSE CONTAINED IN
THEIR RESPECTIVE ANNUAL REPORTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1998
<PAGE>
EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINING FINANCIAL INFORMATION
The following Unaudited Pro Forma Combining Balance Sheet of Viatel as of
September 30, 1999 and Unaudited Pro Forma Combining Statement of Operations
of Viatel for the nine months ended September 30, 1999 and the year ended
December 31, 1998 illustrate the effect of our merger with Destia, the
exchange of $205,790,000 aggregate principal amount of 11.50% senior dollar
notes due 2009 of Viatel for all outstanding 11% senior discount notes due
2008 of Destia (the "Exchange Offer") and the private placement of
approximately $64.0 million of 11.50% senior dollar notes in connection
therewith (the "Private Placement"). The Unaudited Pro Forma Combining
Balance Sheet assumes that the merger with Destia had been completed as of
September 30, 1999 and the Unaudited Pro Forma Combining Statements of
Operations assume that the merger with Destia had been completed as of the
beginning of the periods presented. Certain reclassifications have been made
to Destia's financial statements to conform with Viatel's presentation.
Under the terms of our acquisition of Destia, the holders of Destia
common stock received shares of Viatel common stock on the basis of an
exchange ratio of 0.445 of a Viatel share for each Destia share. Under the
Exchange Offer, the holders of Destia discount notes will receive a cash
payment of $51.24 and $686.03 principal amount of Viatel's 11.50% senior
dollar notes for each $1,000 principal amount at maturity of Destia's
discount notes. The purpose of the Private Placement was to provide funding
for the cash portion of the exchange offer, the consent payment and deferred
financing costs.
ACCOUNTING TREATMENT
Viatel will record the merger as a purchase transaction. For accounting
purposes, Viatel will be deemed to be the acquiring corporation in the merger.
The pro forma adjustments are based upon currently available information
and assumptions that management of Viatel believes are reasonable and certain
information provided by management of Destia. Viatel will account for the
merger based upon the estimated fair market value of the net tangible assets,
intangible assets and liabilities acquired at the date of acquisition. The
adjustments included in the Unaudited Pro Forma Combining Financial
Information represent the preliminary determination of these adjustments
based upon available information. Viatel cannot provide any assurance that
the actual adjustments will not differ significantly from the pro forma
adjustments reflected in the Unaudited Pro Forma Combining Financial
Information.
The Unaudited Pro Forma Combining Financial Information is not necessarily
indicative of either future results of operations or results that might have
been achieved if the merger with Destia had been consummated as of the indicated
dates. The Unaudited Pro Forma Combining Financial Information should be read in
conjunction with the historical financial statements of Viatel and Destia,
together with the related notes thereto, which are included, or incorporated by
reference, in this Current Report on Form 8-K.
<PAGE>
UNAUDITED PRO FORMA COMBINING BALANCE SHEET AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA VIATEL PRO
VIATEL DESTIA MERGER FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................ $ 434,936 $ 85,834 $ -- $ 520,770
Restricted cash equivalents.............................. 5,447 -- -- 5,447
Restricted marketable securities, current................ 66,569 4,359 21,709 (4) 92,637
Trade accounts receivable, net........................... 60,995 52,518 -- 113,513
Other receivables........................................ 42,610 -- -- 42,610
Prepaid expenses......................................... 10,277 6,445 -- 16,722
---------- --------- ---------- ----------
Total current assets................................. 620,834 149,156 21,709 791,699
---------- --------- ---------- ----------
Restricted marketable securities, non-current.............. 96,848 16,978 15,278 (4) 129,104
Property and equipment, net................................ 715,483 146,325 -- 861,808
Cash securing letters of credit for network construction... 79,537 -- -- 79,537
Intangible assets, net..................................... 66,506 61,101 864,123 (1) 939,909
(61,101)(1)
9,280 (4)
Other assets............................................... 15,193 3,123 -- 18,316
---------- --------- ---------- ----------
Total assets......................................... $1,594,401 $ 376,683 $ 849,289 $2,820,373
========== ========= ========== ==========
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Accrued telecommunications costs......................... $ 34,896 $ 19,842 $ -- $ 54,738
Accounts payable, other accrued expenses and deferred
revenue................................................ 64,051 59,608 7,744 (1) 132,878
1,475 (4)
Property and equipment purchases payable................. 196,814 -- -- 196,814
Accrued interest......................................... 28,500 4,359 -- 32,859
Current installments of notes payable, long-term debt and
obligations under capital leases....................... 12,259 10,105 -- 22,364
---------- --------- ---------- ----------
Total current liabilities............................ 336,520 93,914 9,219 439,653
---------- --------- ---------- ----------
Long-term liabilities:
Long term debt........................................... 1,262,491 359,730 205,790 (1) 1,679,105
(209,070)(1)
60,164 (4)
Notes payable and obligations under capital leases,
excluding current installments......................... 28,109 24,657 -- 52,766
---------- --------- ---------- ----------
Total long-term liabilities.......................... 1,290,600 384,387 56,884 1,731,871
Commitments and contingencies
Stockholders' equity (deficiency):
Common stock............................................. 326 315 (315)(1) 467
141 (1)
Non-voting common stock.................................. -- 1 (1)(1) --
Additional paid-in capital............................... 389,845 82,420 (82,420)(1) 1,071,272
552,128 (1)
105,976 (1)
23,323 (1)
Unearned compensation.................................... (6,115) -- -- (6,115)
Accumulated other comprehensive loss..................... (24,968) (1,173) 1,173 (1) (24,968)
Accumulated deficit...................................... (391,807) (183,181) 183,181 (1) (391,807)
---------- --------- ---------- ----------
Total stockholders' equity (deficiency).............. (32,719) (101,618) 783,186 648,849
---------- --------- ---------- ----------
Total liabilities and stockholders' equity........... $1,594,401 $ 376,683 $ 849,289 $2,820,373
========== ========= ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combining financial information.
2
<PAGE>
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
VIATEL
VIATEL DESTIA PRO FORMA MERGER PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ---------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Communication services revenue............. $ 151,204 $226,815 $ -- $ 378,019
Capacity sales............................. 59,173 -- -- 59,173
--------- -------- --------- ---------
Total revenue............................ 210,377 226,815 -- 437,192
--------- -------- --------- ---------
Operating expenses
Cost of services and sales................. 162,858 161,415 -- 324,273
Selling, general and administrative........ 63,380 89,083 -- 152,463
Depreciation and amortization.............. 39,039 20,393 92,585 (2) 147,751
(4,266)(3)
--------- -------- --------- ---------
Total operating expenses................. 265,277 270,891 88,319 624,487
--------- -------- --------- ---------
Operating loss............................... (54,900) (44,076) (88,319) (187,295)
Interest income.............................. 21,413 5,501 -- 26,914
Interest expense............................. (97,344) (35,007) (23,517)(6) (140,467)
16,134 (5)
(733)(4)
Other expense................................ -- (1,055) -- (1,055)
--------- -------- --------- ---------
Net loss..................................... (130,831) (74,637) (96,435) (301,903)
--------- -------- --------- ---------
Dividends on redeemable convertible preferred
stock...................................... (1,341) -- -- (1,341)
--------- -------- --------- ---------
Net loss attributable to common
stockholders............................... $(132,172) $(74,637) $ (96,435) $(303,244)
========= ======== ========= =========
Loss per common share, basic and diluted:
Before extraordinary item.................. $ (4.85) $ (2.81) $ (7.34)
From extraordinary item.................... -- -- --
--------- -------- ---------
Net loss attributable to common
stockholders............................. $ (4.85) $ (2.81) $ (7.34)
========= ======== =========
Weighted average common shares outstanding,
basic and diluted.......................... 27,250 26,521 41,335 (7)
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combining financial information.
3
<PAGE>
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
VIATEL
VIATEL DESTIA PRO FORMA MERGER PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ---------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue:
Communication services revenue............. $ 131,938 $193,737 $ -- $ 325,675
Capacity sales............................. 3,250 -- -- 3,250
--------- -------- --------- ---------
Total revenue............................ 135,188 193,737 -- 328,925
--------- -------- --------- ---------
Operating expenses
Cost of services and sales................. 122,109 140,548 -- 262,657
Selling, general and administrative........ 44,893 80,092 -- 124,985
Depreciation and amortization.............. 16,268 11,866 123,446 (2) 149,034
(2,546)(3)
--------- -------- --------- ---------
Total operating expenses................. 183,270 232,506 120,900 536,676
--------- -------- --------- ---------
Operating loss............................... (48,082) (38,769) (120,900) (207,751)
Interest income.............................. 28,259 11,516 -- 39,775
Interest expense............................. (79,177) (41,030) (31,356)(6) (135,389)
17,151 (5)
(977)(4)
Other expense................................ -- (661) -- (661)
--------- -------- --------- ---------
Loss before extraordinary loss............... (99,000) (68,944) (136,082) (304,026)
Extraordinary loss on debt prepayment........ (28,304) -- -- (28,304)
--------- -------- --------- ---------
Net loss..................................... (127,304) (68,944) (136,082) (332,330)
Dividends on redeemable convertible preferred
stock...................................... (3,301) -- -- (3,301)
--------- -------- --------- ---------
Net loss attributable to common
stockholders............................... $(130,605) $(68,944) $(136,082) $(335,631)
========= ======== ========= =========
Loss per common share, basic and diluted:
Before extraordinary item.................. $ (4.44) $ (3.31) $ (8.28)
From extraordinary item.................... (1.23) -- (0.76)
--------- -------- ---------
Net loss attributable to common
stockholders............................... $ (5.67) $ (3.31) $ (9.04)
========= ======== =========
Weighted average common shares outstanding,
basic and diluted.......................... 23,054 20,846 37,139 (7)
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combining financial information.
4
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL INFORMATION
(1) Reflects the acquisition by Viatel Acquisition Corp. of Destia at
September 30, 1999 as follows:
(i) the issuance of 14.1 million shares of Viatel common stock using an
exchange ratio of 0.445 of a share of Viatel common stock for each share
of Destia common stock; Viatel common stock is valued at $39.21 per
share, which represents the average of the closing stock price three
days prior to and three days after the announcement of the merger.
(ii) the exchange by holders of Destia's 11% senior discount notes with
accreted value of $209,070,000 at September 30, 1999, for Viatel's
11.50% notes with an estimated aggregate principal amount of
$205,790,000 and cash of $15,372,000. Under the terms of the exchange,
holders of Destia's 11% senior discount notes will receive $686.03
principal amount of Viatel's 11.50% notes, $20.00 as a consent payment
and $51.24 in cash for each $1,000 principal amount at maturity of
Destia 11% senior discount notes. The pro forma calculations assume
that none of Destia's 13.50% senior notes due 2007 will be put back to
Destia pursuant to the offer to repurchase that Destia will be required
to make as a result of the merger. To the extent such notes are put
back to Destia, cash will be decreased or other indebtedness will be
increased.
(iii) estimated transaction costs for Viatel of $7,744,000;
(iv) elimination of Destia goodwill and deferred financing costs;
(v) the value of Viatel stock options exchanged for outstanding Destia stock
options. Such value has been determined using the Black-Scholes method
assuming 91.9% volatility, a risk free interest rate of 5.9% and an
average exercise period of two years;
(vi) the value of Viatel warrants exchanged for outstanding warrants of
Destia. Such value has been determined using the Black-Scholes model
assuming 91.9% volatility, a risk free interest rate of 5.9% and an
average exercise period of two years; and
(vii) the elimination of historical net assets acquired comprised of Destia's
historical stockholders' equity reduced by goodwill and deferred
financing fees.
<TABLE>
<S> <C> <C>
Issuance of common stock (dollars in thousands)
Destia shares outstanding at September 30, 1999......... 31,547,066
Destia non-voting common shares outstanding at
September 30, 1999.................................... 104,388
-----------
Adjusted Destia shares outstanding September 30, 1999... 31,651,454
Exchange ratio of 0.445 to 1 share...................... 0.445
-----------
Number of shares issued to acquire Destia............... 14,084,897
Per share price......................................... $ 39.21
Value of shares issued.................................. $ 552,269
Value of debt exchanged................................. 205,790
Cash portion of debt exchanged.......................... 15,372
Value of options exchanged.............................. 105,976
Value of warrants exchanged............................. 23,323
Estimated Viatel transaction costs...................... 7,744
---------
Purchase price.......................................... 910,474
Less net assets acquired:
Destia 11% senior discount notes due 2008 exchanged..... $ 209,070
Destia stockholders' deficit............................ (101,618)
Destia intangible assets................................ (49,863)
Destia deferred financing fees.......................... (11,238)
-----------
46,351
Excess of cost over historical net assets acquired...... $ 864,123
</TABLE>
5
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL INFORMATION
(1)--Continued
For illustrative purposes, Viatel has made a preliminary allocation of
excess cost over estimated net assets acquired to goodwill as Destia's
assets and liabilities are estimated to approximate fair value. The final
allocation of purchase price to assets and liabilities acquired will
depend upon the final purchase price and the final estimates of fair
values of assets and liabilities of Destia at the closing date. Viatel
will undertake a study to determine the fair values of assets and
liabilities acquired and will allocate the purchase price accordingly.
Viatel believes that the carrying value of current assets and current
liabilities approximates fair value and that the excess of cost over
historical net assets acquired will be allocated to property and
equipment, telecommunications licenses, goodwill and other identifiable
intangibles. However, there can be no assurance that the actual
allocation will not differ significantly from the pro forma allocation.
(2) Reflects the amortization expense of the excess of cost over historical net
assets acquired in the merger by use of the straight-line method over
7 years. Should the allocation of such excess of cost over historical net
assets acquired differ significantly as described in note 1 above,
amortization expense could increase since the depreciable lives of assets
other than goodwill may be shorter.
(3) Reflects the elimination of Destia's historical amortization of goodwill and
deferred financing costs.
(4) Reflects the sale of $63,666,000 in gross principal amount of Viatel's
11.50% senior dollar notes due 2009 for cash. The net proceeds of
$58,359,000 from the offering are assumed to be applied as follows:
a) $36,987,000 to purchase U.S. government securities that are pledged to
secure the payment of interest through March 15, 2001 on $269,456,000
aggregate principal amount of Viatel's 11.50% senior dollar notes;
b) $15,372,000 to be applied towards the cash payment portion of the
exchange offer to holders of Destia's 11% senior discount notes due 2008;
c) $6,000,000 towards the consent payment paid to such holders. The related
deferred financing costs of $3,280,000 and the consent payment of $6,000,000
are being amortized over the term of the related debt.
(5) Reflects the elimination of Destia's historical interest expense for its 11%
senior discount notes.
(6) Reflects interest expense and amortization of discount on Viatel's 11.50%
notes.
(7) The average common shares outstanding used in calculating pro forma loss per
common share from continuing operations are calculated assuming that the
estimated number of shares of Viatel common stock to be issued in the merger
were outstanding from the beginning of the periods presented. Options and
warrants to purchase shares of common stock were not included in computing
pro forma diluted earnings per common share because their inclusion would
result in a smaller loss per common share.
6
