BT Group to Buy Infonet Services in Deal
LONDON – BT Group PLC said Monday it is buying U.S.-based Infonet Services Corp., in a deal that values the company at $965 million.
The British telecommunications company said the purchase would improve its position in the key North American and Asian markets.
BT said Infonet, a leading provider of global communications services, has a net cash balance of $390 million and that the aggregate worth of the deal was $575 million. Under the terms of the agreement, stockholders of Infonet will receive $2.06 in cash for each share of Infonet common stock.
BT said shareholders representing 97 percent of Infonet’s voting share capital have committed to support the deal, which is also subject to regulatory clearance,
The move represented a surprise return to the U.S. market for BT, whose money-losing joint venture with AT&T Corp. closed in 2001. The writedown of the joint venture, Concert, cost BT $1.8 billion.
“This is another milestone in BT’s transformation into a leading global provider of IT and networking services,” BT chief executive Ben Verwaayen said. “It is our goal to be the first choice for multi-site organizations around the world as they address their increasingly complex communications needs.”
BT Global Services chief executive Andy Green said Infonet brings the company “specialist skills, a great customer base, increased global reach and additional local presence where we need it.”
Jose A. Collazo, Infonet chief executive, called the transaction great news for the company’s customers, employees and partners.
“While continuing to take full advantage of our existing services and delivery platform, our customers will also be able to access the whole breadth of BT’s product and solutions capabilities,” he said.
BT said it expected the deal to be completed in the first half of 2005. It predicted “significant” cost savings from combining the two businesses, in part through the rationalization of country operations, back-office and administrative functions.
Analysts, however, expressed skepticism about the deal.
Andrew Darley at ING said the move represented a return to the strategies that telecom operators used during the tech boom of the late 1990s, and that investors would be nervous.
Shares in BT fell 0.91 percent to close at 190.50 pence ($3.53) Monday on the London Stock Exchange.
Infonet is based in El Segundo, California. Its main shareholders, together holding 97 percent of voting shares, are KDDI Corp. of Japan; Dutch company KPN Telecom BV; Swisscom AG of Switzerland; Spain’s Telefonica International Holding BV; Nordic company TeliaSonera AB and Telstra Corp. Ltd. of Australia.
Infonet provides global data communications services to multinational corporations and employs about 1,000.
Concert was expected to emerge as a global leader in cross-border telecommunications when it formed from the international operations of AT&T and BT in 1998.
But Concert was hammered by the U.S. economic slowdown several years later, intense competition, a lack of demand for the service and overlap with services offered by its parent companies. The company suffered heavy losses and was closed in October 2001.
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On the Net:
Infonet: www.infonet.com
BT: www.bt.com