PageNet, Arch Communications Agree to Merge

The two largest U.S. paging companies, Paging Network Inc. and Arch Communications Group Inc., on Monday agreed to merge in a last-ditch bid to survive in a business pressured by intense competition and outmoded technology.

The companies did not give a value for the deal, but based on the various conversion ratios and Arch’s closing stock price on Friday of $6.81, the combined companies would have a stock market value of about $1.12 billion.

The merged companies--which will keep Arch’s name and its Westborough, Mass., headquarters but will be majority-owned by holders of PageNet securities--will have 16 million subscribers, nearly three times that of its closest rival, Metrocall Inc.

Dallas-based PageNet and Arch now rank No. 1 and 2, respectively, although neither has turned a profit in years. PageNet had more than $1 billion in revenue in 1998, while Arch has annual revenue of more than $800 million.

The merger amounts to an effort to stave off a PageNet bankruptcy, which PageNet said is its backup plan should the deal fall through.

Paging operators have struggled under intense competition not only within the industry but from the expansion of other wireless-based businesses such as mobile-phone services and hand-held wireless computers that provide the same services and much more.

Terms of the deal call for a recapitalization of the combined company and giving owners of both companies’ debt securities hefty chunks of common stock in exchange for their debt holdings.

When the deal is complete, expected during the first half of 2000, PageNet’s current bondholders will own 44.5% of the new company and its shareholders will own 7.5%. Arch’s current common shareholders will own 29.6% of the company, while its note holders will own 17.2% and its Series C preferred shareholders will own 1.2%.

On Nasdaq, Arch shares closed down 63 cents at $6.19, while Paging Network closed up 6 cents at $1.03.