In an astonishing twist to the bidding for MCI Communications Corp, GTE Corp has entered the fray to acquire the US long- distance carrier. MCI has long been promised to British Telecommunications Plc but recently also became the target of an unsolicited bid from WorldCom Inc. Unlike its two rivals GTE Corp is offering an all-cash bid for MCI, valued at approximately $28bn or $40 a share offer. According to GTE, the transaction will form a company with combined revenues of $40bn, operating more than 21 million local lines and more than 24 million long-distance lines. GTE waited until after the markets closed before making confirming its bid although trading in both MCI and GTE shares was halted for part of the afternoon after rumors of the deal hit Wall Street. MCI officials later confirmed said it had received an unsolicited proposal from GTE and that its board would meet to review all issues and options with respect to the GTE proposal and the unsolicited proposal received from WorldCom, in the context of the company’s long standing strategic merger agreement with BT. The Board had already been due to meet this week regarding the surprise bid made by WorldCom two weeks ago. Connecticut-based GTE Corp has positioned itself as a national provider of integrated telecommunications services providing local service in 29 markets and long distance in all 50 states. The company also recently acquired internet service provider BBN Corp and forged a deal to buy a national, state-of-the-art fiber optic network from Qwest Communications International Inc. The GTE bid will complicate the decision for the MCI shareholders that are due to vote on the BT merger price before the end of the year. If the BT price looked low before the entrance of GTE to the equation with another bid higher than the BT offer looks to make a vote in favor of BT even less likely. In August, BT renegotiated its cash and share offer for MCI after MCI disclosed wider-than-expected losses in its local phone business and slower growth in long distance. BT is now offering $34 per share down from $43.50. The deal gave MCI’s shareholders just 25% of the enlarged group. WorldCom Inc made an all-stock offer of $33.88bn – $9bn more than British Telecommunications renegotiated cash and share offer for the 80% of MCI that the company does not already control.
Although the GTE offer comes in below the WorldCom bid it could be more attractive to conservative MCI shareholders who have about the WorldCom offer as its value was solely dependent on WorldCom’s share price, despite the company having previously posted returns of 50% in a year. At the close of the market MCI finished up $1.56 at $36.86 while GTE closed down $2.19 at $48.
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