WorldCom has acquired MCI for $37 billion (£24.6 billion), representing the biggest takeover of a company, to date. British Telecom, which had originally bid for MCI, is to exit the deal and will get $465 million as a break-up fee for terminating its merger plans. WorldCom recently bought out TCL Telecom in Ireland for an undisclosed figure and industry sources said last night that the merger would greatly strengthen the company's presence in Ireland.
The deal, which the companies billed as a merger, involves WorldCom making a raised offer - to $51 a share from $41.50 - and will be paid in WorldCom stock to all shareholders other than British Telecommunications, which holds a 20 per cent stake in MCI and will receive $7.4 billion in cash.
The deal topped a competing $28 billion bid made by GTE Corporation and has been approved by the directors of both companies, MCI and WorldCom said.
With British Telecommunications cashed out, MCI shareholders would own about 45 per cent of the new company, while WorldCom would have a 55 per cent stake.
The new company, which will be called MCI WorldCom, is expected to generate more than $30 billion in sales next year, according to the statement.
The merger should also boost WorldCom's earnings by more than 20 per cent in the first year after the deal closes, it added.
MCI, which has its headquarters in Washington, offers a comprehensive array of global services. Its revenues last year were $18.5 billion and it is the third largest carrier of international voice traffic.
It also claims to offer one of the world's most advanced Internet networks. WorldCom, which operates in more than 50 companies, is the fourth largest long-distance operator in the US. It has expanded rapidly through acquisition into local services, especially for the financial sector.
Its subsidiary, UUNET Technologies, is an international providers of Internet services.
WorldCom bought out TCL, an Irish telecommunications company which provides telecommunications services to the corporate sector last month. The price was not disclosed but the deal was said to value the company at around £20 million. WorldCom had owned 30 per cent of TCL, and bought the remaining 70 per cent.
In a statement yesterday, TCL's founder and chief executive, Mr Sean Melly, said it was a "fabulous time" to be part of WorldCom and its global plans. "Our decision to partner with WorldCom back in 1995 will truly benefit our Irish customers, delivering a complete range of local, long distance, Internet and international communications services, unequalled anywhere in the world," he said.
Industry sources said last night that TCL had been developing a strong customer base when it was bought by WorldCom and this had significantly strengthened its presence in Ireland.
"MCI is a well-respected brand from a business perspective," said the source, "and it will give TCL (WorldCom) connectivity worldwide."
Ironically British Telecom is seeking to increase its presence in Ireland and to capitalise on the liberalising telecommunications market. It has been talking to the ESB for several months about a £50 million deal through which it could developed fixed line networks using the ESB's existing infrastructure.
British Telecom said in a statement yesterday that it had made a pre-tax gain of $2.25 billion from its US transactions. It got the $465 million compensation for terminating the merger as it had hinged its international expansion strategy on the merger agreement with MCI.
The company said that it would remain in partnership with MCI in a US joint venture, Concert, which is controlled by the British company.
BT would retain control of Concert but would also "be free to pursue other US alliances and investments", the company said in a statement.
The company said it would retain its 75 per cent stake in Concert and reserved the right to buy MCI's 25 per cent share.
