Product details

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Abstract

This is the second of a two-case series (398-017-1 and 398-018-1). On 1 October 1997, WorldCom Inc proposed the highest value corporate bid in US history for fellow-telecommunications company, MCI Communications. Later, the bid was raised still further. But WorldCom was not the only bidder; for nearly a year BT had been involved in merger discussions with MCI which had reached an advanced stage. In November 1997 GTE Corporation put in a competitive bid. Part 1 of this case study looks at the background of domestic US, UK and international competition in telecoms, and the regulatory, technological and strategic features of the industry which underlay it. MCI''s strategy as a major telecoms provider in the US is examined, together with the competitive strategies adopted by the suitors for its hand, WorldCom, BT and GTE. The strategic advantages and disadvantages of each of the proposed combinations with MCI are weighed up. Part 2 of the case study focuses on the several quite complex and competitive bids for MCI Communications made by BT, WorldCom and GTE. Interest centres on the nature of the bids, eg. BT''s first bid in 1994 which was nearly all-share but contained ''poison pills'', and WorldCom''s first bid in October 1997 which was all-share accompanied by a ''cap and collar'', as well as the valuation of each offer. In the case of each offer and revised offer, data is provided to demonstrate the effect of the merger announcements on the target/bidder''s shares. The analysis also considers ways in which bidders proposed to pay for the deals. MCI finally accepted an increased offer from WorldCom which necessitates working out the cost of buying out the existing BT stake in MCI. The case study considers public reasons given by MCI for accepting the revised WorldCom bid and examines whether the acquisition was a win-win or win-lose one using the method adopted by Bennett Stewart in ''Quest for Value'' which looks at the immediate post-announcement behaviour of share prices.
Industry:
Size:
Market caps USD21 billion and USD28 billion 1997
Other setting(s):
1994-1997

About

Abstract

This is the second of a two-case series (398-017-1 and 398-018-1). On 1 October 1997, WorldCom Inc proposed the highest value corporate bid in US history for fellow-telecommunications company, MCI Communications. Later, the bid was raised still further. But WorldCom was not the only bidder; for nearly a year BT had been involved in merger discussions with MCI which had reached an advanced stage. In November 1997 GTE Corporation put in a competitive bid. Part 1 of this case study looks at the background of domestic US, UK and international competition in telecoms, and the regulatory, technological and strategic features of the industry which underlay it. MCI''s strategy as a major telecoms provider in the US is examined, together with the competitive strategies adopted by the suitors for its hand, WorldCom, BT and GTE. The strategic advantages and disadvantages of each of the proposed combinations with MCI are weighed up. Part 2 of the case study focuses on the several quite complex and competitive bids for MCI Communications made by BT, WorldCom and GTE. Interest centres on the nature of the bids, eg. BT''s first bid in 1994 which was nearly all-share but contained ''poison pills'', and WorldCom''s first bid in October 1997 which was all-share accompanied by a ''cap and collar'', as well as the valuation of each offer. In the case of each offer and revised offer, data is provided to demonstrate the effect of the merger announcements on the target/bidder''s shares. The analysis also considers ways in which bidders proposed to pay for the deals. MCI finally accepted an increased offer from WorldCom which necessitates working out the cost of buying out the existing BT stake in MCI. The case study considers public reasons given by MCI for accepting the revised WorldCom bid and examines whether the acquisition was a win-win or win-lose one using the method adopted by Bennett Stewart in ''Quest for Value'' which looks at the immediate post-announcement behaviour of share prices.

Settings

Industry:
Size:
Market caps USD21 billion and USD28 billion 1997
Other setting(s):
1994-1997

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