MCI WorldCom to Buy SkyTel for $1.3 Billion
MCI WorldCom Inc. said Friday that it will buy pager company SkyTel Communications Inc. for nearly $1.3 billion, just days after the companies scuttled rumors they were discussing a merger.
MCI WorldCom said it would swap 0.25 share for each SkyTel share, or $21.24 each, as it seeks to add a wireless property to fill a gaping hole in an otherwise broad list of telecommunications businesses.
MCI WorldCom, the nation’s No. 2 long-distance phone company and a major owner of the circuitry that makes up the Internet, would also absorb about $525 million in debt in the deal, which was announced after the markets closed.
The purchase gives MCI WorldCom an entree into the paging business, but the company has not yet made a direct move into the much larger wireless calling market. So far, it resells other cellular services under its own name to a small number of customers.
The SkyTel deal comes after two failed attempts by MCI WorldCom to buy its way into the wireless voice communications industry.
Just weeks ago, talks to acquire Nextel Communications Inc., the largest independent wireless company, unraveled after the companies failed to agree on price. In January, MCI WorldCom dropped out of a bidding war to buy AirTouch Communications, whose shareholders Friday approved acquisition by Britain’s Vodafone Group.
SkyTel shares have risen sharply in recent weeks on expectations that it would be acquired by MCI WorldCom. The rumors were stoked further Tuesday on news that an MCI WorldCom employee reserved a World Wide Web address that included both companies’ names.
MCI WorldCom had said that the employee had acted on his own initiative and that the Web address request was not “an indication of any official company intention.” MCI WorldCom said Friday that the requested Web address and the acquisition agreement were a “coincidence.”
SkyTel and MCI WorldCom, both based near Jackson, Miss., have long-standing ties. MCI WorldCom is the largest reseller of SkyTel’s messaging services.
SkyTel has been a leader in the move to two-way pagers that enable customers to exchange messages directly with other pagers or via the Internet, and is one of the few profitable companies in the paging industry.
Analysts said the deal would be a major relief for SkyTel, which like other paging companies has suffered at a time when consumers carry cell phones, Palm Pilots and other equipment that make traditional pagers unnecessary.
SkyTel, which has 1.6 million paging customers, recently hired Warburg Dillon Read to help it explore strategic options.
MCI WorldCom, which has about 74,000 employees, declined to comment on any possible job cuts. SkyTel has about 2,000 employees.
The deal is expected to be completed in six to nine months, pending shareholder and regulatory approval.
SkyTel shares rose $1 to close at $20.31, and MCI WorldCom shares rose $1.44 to close at $86.38, both on Nasdaq.
