|
|
|
|
Extra
Baby Bell buys Ma Bell
$16 billion deal with SBC spells the end for an independent AT&T, whose offspring helped run it out of business.
By MSN Money news services
SBC Communications has agreed to buy former parent AT&T for $16 billion, creating the nation's largest communications company and ending the independent run of a company whose roots stretch back to the telephone's invention.
The decision followed late-night meetings by directors of SBC (SBC, news, msgs), the nation's second-biggest regional phone company, and the 130-year-old icon AT&T (T, news, msgs), which gave birth to SBC when its monopoly was broken up in 1984.
SBC spokesman Larry Solomon said documents in the acquisition were signed early Monday after SBC's board of directors approved the deal. Board members of AT&T approved the transaction on Sunday evening.
The acquisition is still subject to regulatory and shareholder approvals. The acquisition was expected to close by the first half of 2006.
San Antonio-based SBC has about 50 million local-telephone customers, mostly in the Midwest and South. It also is a 60% owner of Cingular Wireless, which serves more than 46 million wireless customers.
AT&T's history dates back 130 years to the invention of the telephone, Once known as Ma Bell, the company handled the nation's telephone calls before it was broken apart 21 years ago. The Bedminster, N.J.-based company today has nearly 30 million long-distance customers.
"Today's agreement is a huge step forward in our efforts to build a company that will lead an American communications revolution in the 21st century," Edward Whitacre, SBC chairman and chief executive, said in a statement.
"We are combining AT&T's national and global networks and expertise with SBC's strong platforms and skills in local exchange service, wireless and broadband," he added. "It's a great combination."
Analysts question reasoning
Shareholders of AT&T, under terms of the agreement, will receive total consideration currently valued at $19.71 per share, or about $16 billion. From SBC, AT&T shareholders will receive 0.77942 shares of the Texas company's common stock for each AT&T common share, in an exchange ratio equaling $18.41 per share based on SBC's closing stock price on Jan. 28, 2005. That amounts to about $15 billion in stock, Solomon said.
Additionally, AT&T will pay its shareholders a special dividend of $1.30 per share at the time of closing, totaling about $1 billion. The stock consideration in the transaction was expected to be tax-free to AT&T shareholders.
The deal, which is expected to close by the first half of 2006, has already drawn criticism from analysts, who slammed the $16 billion purchase price as too much for a company with shrinking revenues and questionable growth prospects.
AT&T, whose market value and revenues peaked in 1999, has been slammed by increasing competition from SBC and other dominant local carriers in the long-distance market
"AT&T's business doesn't seem that accretive or value added,'' said Greg Gorbatenko, an analyst with Marquis Investment Research.
AT&T last July withdrew from its traditional residential phone market, stung by government regulation and a changing marketplace as consumers turn increasingly to wireless services.
A Baby Bell returns home
In 1984, AT&T settled a Justice Department antitrust lawsuit by agreeing to spin off the regional Bells, companies known today as SBC, BellSouth (BLS, news, msgs), Verizon Communications (VZ, news, msgs) and Qwest Communications (Q, news, msgs). Former Federal Communications Commission chief Reed Hundt had deemed a reunion "unthinkable'' in 1997.
For SBC Chairman Whitacre, a voracious purchaser of companies during his 15-year tenure at the helm of the Texas-based company, buying AT&T would complete a transformation of SBC from a regional, local telephone company into an international force.
"With this move, SBC would be elevated above the other Baby Bells with national business services,'' industry analyst Jeff Kagan said.
It is unclear what will happen to the AT&T name. "We value the heritage and strength of the AT&T brand, which is one of the most widely recognized and respected names throughout the world, and it will certainly be a part of the new company's future,'' Whitacre said in a statement.
Whitacre will be chairman and chief executive officer of the combined company, while AT&T's CEO, David Dorman, would be president.
The next target
The acquisition of AT&T will shift attention to MCI, No. 2 long-distance company, as the next takeover target, analysts told Reuters news service.
"It would definitely put MCI on the block and it would be acquired quickly by one of the other Bells, Verizon or BellSouth or Qwest,'' said Kagan.
A takeover of the two largest long-distance carriers has been seen by some industry executives as inevitable as the Baby Bells try to expand their mix of services. But the timing seems premature, analysts said.
SBC would be smarter to focus on its faster-growing wireless and data services than taking on the challenge of the difficult integration of AT&T, reducing its overall revenue growth, and risking exposure to the shrinking corporate long-distance market, Lehman Brothers analyst Blake Bath said in a research report.
|
|
|
|
