Global TeleSystems Group to Buy Esprit Telecom for $850 Million

Global TeleSystems Group Inc., a U.S. company backed by billionaire George Soros, agreed Tuesday to buy British rival Esprit Telecom Group for $849.9 million in a deal that would create a communications network spanning 19 European nations.

McLean, Va.-based Global TeleSystems, which offers phone services in 12 European countries, said it will pay 0.1271 share for each Esprit share, valuing Esprit shares at $5.96 each, and assume $228 million in debt in the deal.

Both companies have been building high-speed networks to carry traffic for businesses and other phone companies across Europe’s newly deregulated markets. Their proposed combination comes amid competition from Qwest Communications International Inc., Cable & Wireless and a planned joint venture of AT&T; Corp. and British Telecommunications.

The combined company would have a market value of $4.1 billion, about 3,000 employees and 35,000 business customers in Western Europe. In the latest quarter, the companies had combined revenue of $482 million.

GTS is a shareholder in Hermes Europe Railtel, a Brussels-based company that competes with Esprit in serving as a so-called carrier’s carrier, providing phone service to other telecom companies. Last week Hermes said it nearly doubled the size of its European network since August.

Holders of 65% of the voting shares of Esprit have agreed to accept the offer, the companies said. The boards of both firms will recommend that shareholders approve the acquisition, which is expected to close in the first half of 1999.

Esprit’s American depositary receipts surged $9.25 to close at $39.50 on Nasdaq. GTS, which went public earlier this year at $20 a share, rose $5.13 to $46.88, also on Nasdaq. Soros owns about 12% of GTS’ shares.