Merger Costs May Trim SBC Price for PacTel Shareholders

Pacific Telesis Group shareholders might receive a lower share price if regulatory costs rise for the company’s merger with San Antonio-based SBC Communications Inc., according to a filing with the Securities and Exchange Commission.

PacTel shareholders are slated to receive 0.733 of an SBC share for each PacTel share as part of the merger. That price could be cut should the companies’ regulatory costs associated with the merger turn out higher than expected.

If in readjusting the share price, the figure drops below 0.667 of an SBC share, then PacTel shareholders will have a second opportunity to vote on the merger agreement, according to the filing.

The two companies have plans in place to determine how much of the regulatory costs each should pay in connection with the merger. However, an accounting firm will be hired by each of the companies to provide third opinions if they cannot agree on the matter.

If either of the companies decides to terminate the agreement, that company will have to pay a $300-million breakup fee under terms of the agreement laid out in an 8-K filing with the SEC last week.

San Francisco-based PacTel said the terms for setting a revised share price and a possible termination of the agreement represent a worst-case scenario that needed to be spelled out for precautionary reasons, according to a news report published Monday by the Wall Street Journal.

Company executives were not immediately available for comment on the filing.

SBC shares fell $1.50 to $47.75, while PacTel stock slipped $1 to $32.25. Both trade on the New York Stock Exchange.