Sign in Subscribe
Information technology services

WorldCom Report Suggests Competing Offers Unworkable in Disputed Purchase

Strategic Insights

— 1 min read

A WorldCom report filed with the Securities and Exchange Commission argued that competing offers for Intermedia's valuable Digex subsidiary were unworkable, soothing investor concerns that the WorldCom deal could fall apart. Investor concerns had driven the price of Intermedia's stock down 36 percent since the deal was announced, but the report's release led to a rebound in the stock price. The report maintains that completing the merger by the first half of 2001 remains a goal, despite minority shareholders' lawsuits and concerns.

Key Takeaways:

  • The WorldCom report, filed with the Securities and Exchange Commission, claimed that competing offers for Intermedia's Digex subsidiary were unworkable due to restrictions on Intermedia's ability to accept stock in return for asset sales.
  • The report stated that Exodus Communications, a rival telecommunications company, withdrew its offer to buy Digex because it was unacceptable to sell a large chunk of Intermedia's stock within 270 days.
  • Intermedia's bondholders required that the company use 85 percent of the proceeds from stock sales to purchase assets or pay down its $2.4-billion debt within 270 days.
  • The report's release led to a rebound in Intermedia's stock price, which closed at $22.13, up $1.88.
  • Intermedia's minority shareholders have filed a dozen lawsuits against the company's board of directors, accusing them of acting in their own self-interest and ignoring the interest of Digex's minority shareholders.
  • Intermedia's chief executive, David Ruberg, believes the facts contained in the report will allow the company to prevail in court, despite the lawsuits.

Statistics:

  • The price of Intermedia's stock dropped 36 percent from $31.48 to $20.75 after the WorldCom deal was announced on September 5.
  • Intermedia's stock rebounded after the WorldCom report was filed, closing at $22.13, up $1.88.
  • The bondholders' restrictions required Intermedia to use 85 percent of the proceeds from stock sales to purchase assets or pay down the company's $2.4-billion debt within 270 days.

Sources:

  • "WorldCom Report Says Competing Offers Unworkable" article from an unknown publication, dated September 13, 2000.
  • Securities and Exchange Commission filing: "WorldCom Inc. (Form 425)" dated September 11, 2000.
  • "Exodus Withdrew Its Offer to Buy Digex: WorldCom Report" article from an unknown publication, dated September 13, 2000.

Read more