Early on Monday morning, it emerged that WorldCom Inc, the upstart of the global telecommunications industry, had muscled aside its competitors and won the hand of its former rival MCI Corp in a revised $51 per share offer. The deal will turn MCI WorldCom into the second biggest telecoms carrier in the US, and the largest carrier of US internet traffic. It will also be the biggest merger in corporate history at $37bn. Both GTE Corp and British Telecommunications Plc were blown away by the revised offer, upped from an original deal of just $41.50 a share. GTE Corp made a desperate counter bid late on Sunday afternoon of $45 cash per share, but it was too little too late for the MCI board. The rationale for the huge increase in WorlCom’s offer comes from discussions between MCI and its new partner which exposed a wealth of hitherto unexplored cost savings. These savings will allow the merger to be accretive to shareholders, even under the new offer, WorldCom said. But British Telecommunications Plc has exacted a heavy price in return for its withdrawal. While MCI’s shareholders will receive only paper, BT is gaining $51 per share in cash, totaling a massive $7bn together with a hefty $465m break up fee. In total, BT has walked away with a $2.25bn pre-tax gain on its 20% holding. Sir Peter Bonfield, BT’s chief executive, now has a huge cash pile to aid him in his search for a new global partner.
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