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May 7, 1997updated 05 Sep 2016 1:09pm

GTE BUYS BBN FOR $600M, INKS HUGE CISCO DEAL

By CBR Staff Writer

It’s all happening at BBN Corp, where recent takeover rumors have been substantiated by GTE Corp’s $29.00 per share bid for the Cambridge, Massachusetts research and network services house, valuing it at around $600m. GTE, one of the biggest providers of local telephone services in the US, was offering BBN’s shareholders a 28% premium over Monday’s closing value on the New York Stock Exchange of $22.63, however BBN shares surged almost 28% on Tuesday following the bid and Wall Street speculation that another suitor might enter the fray. The possibility that GTE might have to cough up more than $29.00 brought its shares down $2.12 on the day to close at $45.25. BBN’s shares had climbed from $16.00 since the end of April on speculation the company would be subject of a takeover, closing at $28.87. GTE chief executive Charles Lee said he believed a combined company would be able to grow to between $34bn and $38bn by the year 20001, based on current projections for both firms. GTE had 1996 revenues of $21.34bn, while BBN’s totaled $234.3m. The company was talking confidently about revenue growth of between 10% and 12%, significantly more than the 1.7% achieved in the last 4 years. The announcement coincided with the release of BBN’s third quarter results showing net losses falling to $12.2m from $29.1m this time last year and turnover increasing 57.7% to $95.9m, reflecting the success of BBN Planet, the firm’s Internet services division. BBN, the former internet pioneer Bolt, Beraneck and Newman Inc, has been shrinking fast over the last few years, selling off its non-core businesses and transforming itself into an internet services firm. From GTE’s perspective, the deal is part of a new strategy to expand beyond its 28 state local phone network. GTE also announced a new strategic alliance with Cisco Systems Inc to develop enhanced data and Internet services. GTE will also buy a coast-to-coast fiber optic network and create a new, deregulated unit to market integrated voice, video and data solutions. GTE expects to spend up to $1bn with the network equipment company. GTE President Kent Foster says that the deals are aimed at making GTE a national one-stop provider of local, long distance, Internet and wireless services, and will establish an advanced data network that will be fully operational next year.

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