A Shake-Up at Global Crossing
Faced with a worsening telecommunications market, Global Crossing Ltd. will unveil a major restructuring plan today that includes the sale of two businesses and a proposed merger with its sister firm, Asia Global Crossing, according to an industry source.
Global Crossing, which sells voice and data communication services over fiber-optic networks, also plans to name a new chief executive and will warn investors that its third-quarter financial results will be “substantially below” expectations.
John Leger, chief executive of Asia Global Crossing, will become CEO of the merged company and will serve as CEO of both firms in the interim. Tom Casey, current CEO of Global Crossing, will remain vice chairman and a director at Global Crossing and will oversee the proposed merger, the planned divestitures and financing activities.
The proposed merger, if approved by shareholders, would combine two publicly traded companies with very close ties. Asia Global Crossing was born as a subsidiary of Global Crossing, then was spun off and taken public.
The two companies have overlapping shareholders and board members, and work together to provide global network connections for customers. Asia Global Crossing’s largest shareholder remains Global Crossing, which owns 59% of the company, but Microsoft Corp. and Japan’s Softbank are also sizable investors.
The two corporate boards met Wednesday night and agreed to pursue a merger, but terms were not yet available, according to an industry source.
Global Crossing has been badly battered by ongoing losses and lower revenue projections, as well as its ownership position in bankrupt Web hosting firm Exodus Communications.
Beverly Hills-based Global Crossing also will fall short of expectations for the third quarter that ended Sept. 30, with cash revenue of about $1.2 billion, and its adjusted earnings to be significantly lower than $100 million. The company has about $2.4 billion in cash, not counting proceeds from the sale of the two units.
Global Crossing’s shares closed Wednesday at $2.09, up 2 cents. Asia Global Crossing closed at $2.19, down 6 cents.
