AT&T and McCaw Cellular will merge in $12.6 billion transaction
NEW YORK -- August 16, 1993 -- AT&T announced today that it has signed a definitive merger agreement with McCaw Cellular Communications, Inc., for an all-stock transaction valued at approximately $12.6 billion.
The merger would make AT&T a leading participant in the fastest-growing segment of the telecommunications industry and contribute to its objective of at least 10 percent annual earnings growth.
Under the agreement, which is contingent on regulatory and other approvals, each McCaw share would be exchanged for one AT&T share.
The two companies' decision to merge was a recent outgrowth of discussions following last November's announcement that they were planning a strategic alliance in which AT&T would purchase a one-third interest in McCaw for $3.8 billion, including AT&T's purchase of 35.8 million McCaw shares from British Telecom.
In the current transaction, AT&T will acquire BT's shares at the same price and under the same terms as the other McCaw shares.
The boards of AT&T, McCaw and BT have approved the transaction.
"Telecommunications is growing and converging with other industries so fast that it was almost impossible in our discussions to define and divide future opportunities between the two companies," said AT&T Chairman Robert E. Allen. "A merger offers the best, quickest way to go after this market."
"Wireless communications services are absolutely central to AT&T's networking strategy and key to the company's future earnings growth," said Allen. "We particularly value McCaw because of the entrepreneurial spirit its people have displayed in making the company the leading provider of wireless services in North America."
McCaw's Chairman and CEO, Craig O. McCaw, commented: "If America is to continue as the leader in the development and deployment of wireless communications, bold steps like the combination of AT&T and McCaw need to be taken. Our companies share a vision of anytime, anywhere communications that will be very powerful for an increasingly broad base of customers.
"A relationship of this kind with AT&T," McCaw said, "will allow us to take full advantage of our global opportunities."
McCaw has accepted Allen's invitation to join the AT&T board of directors.
James L. Barksdale, who joined McCaw in 1991, will remain as president and chief operating officer of AT&T's new wireless service business. Barksdale formerly served as chief operating officer of Federal Express.
In the all-stock transaction, the shares of Class A and Class B common stock of McCaw will each be exchanged for one AT&T share. However, in the event that the AT&T stock price trades above $71.73 per share during specified periods shortly prior to the close of the merger, the exchange rate will be adjusted downward to provide AT&T stock worth $71.73 for each McCaw share, subject to a minimum of .909 AT&T shares. Similarly, if the AT&T stock price trades below $53 per share during specified periods shortly prior to the close of the merger, the exchange rate will be adjusted upward to provide AT&T stock worth $53 for each McCaw share, subject to a maximum of 1.111 AT&T shares.
AT&T said it expects to complete the transaction in less than a year.
The company said it was targeting positive earnings growth in the first year of the transaction even after expected dilution of up to 10 percent. McCaw's strong positive net income outlook for 1994 and its expected income growth in the range of 40 to 50 percent would reduce dilution in the years immediately following the transaction. AT&T said the merger will accelerate its capability to achieve its goal of growing earnings at least 10 percent a year.
The all-stock merger would be tax free to McCaw stockholders and accounted for as a "pooling of interests," subject to SEC approval. In a "pooling of interests," the assets and liabilities of the two merged companies are combined.
In addition to approval by McCaw shareowners, the U.S. Department of Justice and the Federal Communications Commission, approval by state regulatory bodies in certain states where McCaw does business will be necessary for completion of the transaction. McCaw shareowners holding a majority of the votes, including members of the McCaw family and BT, have agreed to vote for the merger.
McCaw and AT&T have reached an agreement with certain McCaw shareholders, subject to court approval, to settle pending litigation involving the earlier announced proposal between the two companies.
Commenting further on AT&T's entry into the wireless communications services market, Allen said: "We have repeatedly stressed that AT&T is not interested in re-entering the local telephone business, and today's announcement doesn't change that. More than 99 percent of all cellular calls go through local telephone companies. It will be years, if ever, before that changes. Cellular service supplements and increases -- but doesn't replace -- local service."
The company said no AT&T or McCaw jobs would be lost as a result of the merger and that McCaw's headquarters would remain in Kirkland, Wash.
McCaw provides cellular telephone, paging and personal communications services, as well as wireless data transmission, air-to-ground, land satellite, voice and data communications.
The company had 1992 revenues of $1.74 billion, including revenues from LIN Broadcasting Corp., which is 52-percent owned by McCaw. McCaw has assets of $9.2 billion and long-term debt of $4.9 billion. The company has 4,400 employees. LIN has 1,900 employees.
AT&T had 1992 revenues of $64.9 billion and assets, as of June 1993, of $57.8 billion. The global communications and computer company, which has headquarters in New York, has about 2.4 million shareowners and 316,000 employees.
The deal at a glance
PRICE
$12.6 billion.
STRUCTURE
One share of AT&T stock for each share of McCaw outstanding. *
TAX TREATMENT
The transaction will be tax free for McCaw shareowners.
ACCOUNTING TREATMENT
Application will be made to treat the merger as a "pooling of interests."
APPROVALS
The boards of AT&T, McCaw and BT have approved the agreement. Further, Craig O.
McCaw has agreed to vote all the shares of McCaw stock that he has the right to
vote in favor of the merger.
MCCAW SHAREOWNER OWNERSHIP OF AT&T
About 14 percent.
MCCAW FAMILY OWNERSHIP OF AT&T
About 3 percent.
COMPLETION
September 30, 1994.
* If AT&T shares trade above $71.73 during specified periods shortly prior to the closing, AT&T will be adjusted downward to provide AT&T stock worth $71.73 for each McCaw share, subject to a minimum of .909 AT&T shares. Similarly, if the AT&T stock price trades below $53 per share during the specified periods, the exchange rate will be adjusted upward to provide AT&T stock worth $53 for each McCaw share, subject to a maximum of 1.111 AT&T shares.
Facts and figures of AT&T/McCaw Cellular merger
AT&T MCCAW
BUSINESS.........Communications Cellular telephone,
services and paging, personal
products, network communications services,
equipment and wireless data
computer systems, transmission,
financial services air-to-ground,
and data communications and satellite, voice
HEADQUARTERS.....New York Kirkland, Wash.
1992 REVENUES... $64.9 billion $1.74 billion
(Including LIN)
ASSETS.......... $57.8 billion $9.2 billion
(As of 6/93)
LONG TERM DEBT.. $7.4 billion $4.9 billion
(As of 6/93)
SHARES
OUTSTANDING..... 1.352 billion 145.3 million (Class A)
common shares 60.8 million (Class B)
REGISTERED
SHAREOWNERS..... 2.4 million 8900 Class A
(End of 1992) 19 Class B
PRINCIPAL
STOCK EXCHANGE... NYSE NASDAQ
STOCK PRICE
52-WEEK RANGE...$65 to 40-5/8 $52-1/2 to 20-1/4
EMPLOYEES.......316,000 4,400 (McCaw)
1,900 (LIN)
AT&T Wireless activities
Communications Products Group
AT&T Consumer Products
Federal Systems Advanced Technologies
AT&T Global Business Communications Systems
AT&T Paradyne
AT&T Personal Communications Services
AT&T Business Communications Services
AT&T Consumer Communications Services
AT&T Easylink Services
AT&T Network Wireless Systems
AT&T Microelectronics
AT&T Transmission Systems
AT&T Operations Systems
NCR Corp.
EO, Inc.
AT&T Bell Laboratories