John Kluge to Sell Stake in WorldCom Inc. : Telecom: The billionaire cites estate planning as a reason. Stock’s price drops $2.125.
Billionaire John Kluge announced plans Monday to sell his entire stake in WorldCom Inc., depressing the stock price of the nation’s fourth-largest telephone company.
Kluge owns about 30.9 million shares, or 16.3%, of the Jackson, Miss.-based phone company through his Metromedia Co. and is its chairman as well as its biggest shareholder.
His stake was valued at about $930 million, based on Friday’s closing share price of $30.125. The stock’s 52-week high was $32.
But the share price tumbled Monday after Kluge’s plans were disclosed before trading on the Nasdaq opened.
WorldCom closed down $2.125 a share to $28. That would value Kluge’s stake at about $865 million.
The 80-year-old Kluge said in a statement that the decision to market the stake in WorldCom “reflects my personal estate planning, as well as our longstanding investment philosophy of not holding minority interests for the long term.”
He expressed support for WorldCom’s current management, led by President and Chief Executive Bernard Ebbers.
Ebbers said WorldCom expects to continue to capitalize on the explosive growth in the telecommunications industry and on changes in the regulatory environment.
W. Mark Dunkel, who follows telecommunications for the investment firm Robinson Humphrey Co. in Atlanta, said the huge amount of stock being offered for sale was the main reason for Monday’s price decline.
He said Kluge’s plans may also have disappointed some traders who had hoped WorldCom would be acquired. Kluge’s plans to sell “certainly tells you something like that is not imminent.”
Dunkel said the company has been run very leanly and should do well as a supplier of long-distance capability to the Bell regional companies should they be allowed into that business.
The Metromedia stake will be sold via an underwriting by the investment firm Donaldson, Lufkin & Jenrette Securities Corp.
Kluge said he will remain chairman of WorldCom and said he and two colleagues elected to the WorldCom board as a result of Metromedia’s stake--Stuart Subotnick and Silvia Kessel--will remain directors of the phone company.
WorldCom was created in 1993 by the combination of telecommunications providers LDDS Communications, Metromedia Communications Corp. and Resurgens Communications Group Inc.
It ranks as the fourth-largest long-distance provider behind AT&T; Corp., MCI Communications Corp. and Sprint Corp., with an estimated 5% of the long-distance market.
It has grown through a combination of acquisitions and internal expansion, Ebbers said.
The company lost nearly $150 million, or 95 cents a share, in 1994, on revenue of $2.2 billion. It said the loss was mainly due to costs of its acquisition of IDB Communications Group, which has enabled it to grow internationally.
Revenue for 1994 was double the $1.1 billion the company recorded in 1993, and its revenue for the first six months of this year has already reached $1.75 billion.
Kluge is one of the world’s richest men, with an estimated worth of more than $6 billion and wide-ranging interests in the restaurant, entertainment, broadcasting and medical technology businesses.