MCI Sets Up Funds to Retain Employees
MCI Communications Corp. said Friday that it set aside $420 million to help keep executives and other employees from leaving during the company’s acquisition by WorldCom Inc.
WorldCom, a Jackson, Miss.-based telecommunications company headed by Bernard Ebbers, is acquiring MCI for $41.8 billion. The company outbid GTE Corp. and British Telecommunications for the right to purchase MCI.
In a separate development, BT is reportedly in preliminary merger talks with GTE as it seeks to recoup from its unsuccessful MCI bid.
BT and GTE declined to comment on the report, which appeared in USA Today.
“We don’t comment on rumor and speculation,” said Paul Sharma, a spokesman for BT.
Earlier this month, BT Chairman Iain Vallance said the company is discussing various ventures with many companies, including U.S. phone companies. He said they are “all the usual suspects,” although he stopped short of naming them.
A merger with GTE would give the British telephone company a stake in the $200-billion-a-year U.S. telecommunications market.
It’s the uncertainty created by this type of bidding war that can spur executives and employees to seek employment elsewhere. Increased competition in the U.S. phone industry has also prompted many MCI rivals to seek managers.
Washington-based MCI, seeking to prevent defections, has created three “retention bonus” pools, according to documents filed this week with the Securities and Exchange Commission.
Jim Monroe, an MCI spokesman, said that hundreds of employees will be eligible for bonuses drawn from these pools.
“We have established a number of different retention programs that provide us with flexibility and reach within MCI,” Monroe said Friday. The bonuses will “recognize the performance of key individuals and incent them to continue to contribute to the company.”
The $420 million would provide MCI with enough money to award $7,636 to each of the 55,000 people employed by the company on Dec. 31, 1996. However, it’s unlikely the company would distribute the money to everyone.
Monroe declined comment on the size of the bonuses MCI plans to award individuals, including company Chairman Bert Roberts Jr. Roberts is slated to serve as chairman of MCI WorldCom Inc., the company to be formed upon completion of the acquisition.
The bonus pools include as much as $170 million in cash that MCI’s compensation committee will award to senior executives, subject to the approval of certain details by WorldCom. The money became available after MCI and WorldCom agreed to the acquisition Nov. 9, the SEC filing said.
Separately, MCI will provide managers with $100 million that they can award in the form of cash or stock to “key individuals,” according to the filing. MCI will award up to half of the money on or after Dec. 1, with the remaining 50% to be doled out on or after Dec. 1, 1998.
MCI is setting aside an additional $150 million for awards that will be made after the acquisition, which the companies hope to complete in the late spring or early summer of 1998. MCI will award these funds “in consultation” with WorldCom, according to the SEC filing.
MCI shares rose 44 cents to close at $43.94, and Worldcom shares rose 13 cents to close at $32. Both trade on Nasdaq. On the New York Stock Exchange, GTE shares rose 69 cents to close at $50.56, and BT’s American depositary receipts fell 50 cents to close at $78.
