Qwest and Global Crossing announced separate agreements that end a five-week long takeover battle for two U.S. telephone carriers.
US West agreed to merge with Qwest in a stock swap valued at $34.7 billion, or $69 per share, the companies said. The combined entity, which will retain Qwest's name, will have a market capitalization of $65 billion and revenue of $18.5 billion in 2000, Qwest said.
Cable operator Global Crossing, meanwhile, will proceed with its plan to acquire a long-distance provider, Global Crossing's management and board of directors said in a letter to shareholders. That deal is valued at about $11 billion, or $63 per share.
Global Crossing was in the process of acquiring US West and Frontier when Qwest last month announced unsolicited bids to acquire the companies.
In May of this year, Global Crossing made a $35.5 billion bid for US West, and then raised its earlier offer for Frontier to $12.5 billion, up from the $11.2 billion the company first bid in March.
Qwest said it has withdrawn its bid for Frontier, while Global Crossing has agreed to reduce a penalty placed on US West for terminating its merger agreement, the companies said. That reduced penalty, including a break-up fee in cash, a return of stock and an agreement to purchase $140 million in services from Global Crossing, totals $420 million. The original penalty would have cost US West $800 million.
Qwest said the deal would create a global carrier able to offer wireline and wireless services as well as broadband and Internet services. The carrier emphasized the importance of US West's position in digital subscriber line high-speed Internet services. US West offers these services in over 40 U.S. cities to 5.5 million households.
Qwest Chairman and CEO Joseph Nacchio will retain his position in the merged company, while US West's Chairman, CEO and President Solomon Trujillo will also hold the title of Qwest chairman. Trujillo will also serve as president of the combined company's broadband local and wireless business, Qwest said.
Together with Philip Anschutz, presently chairman of the board of Qwest, Nacchio and Trujillo will work together in operating an Office of the Chairman of the merged company with strategic and budgetary responsibilities, along with approving any purchase or sell-off of businesses.
The 14-member strong board of directors of the merged company will consist of seven members drawn equally from Qwest and from US West.
The merger, subject to the approval of the shareholders of both companies and regulatory bodies, is expected to be completed by the middle of next year, Qwest added. The boards of directors of Qwest and US West have already approved the merger. Under the terms of the agreement, US West has the right to pull out of the merger if Qwest's share price falls below $22 at close of play of trading for 20 days in a row, prior to the conclusion of the tie-up.
The combined company will employ about 64,000 staff and will have its headquarters in Denver at what was formerly US West's headquarters.
Global Crossing's directors and management said the conclusion of the contest for US West and Frontier is favorable for Global Crossing's shareholders.
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