American investors left with smaller stake
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.MCI shareholders woke up yesterday to the gloomy prospect of a much reduced stake in Concert, the new merged company with BT, with speculation that some big US investors may consider taking legal action against the renegotiated terms, writes Chris Godsmark.
The revised agreement gives MCI shareholders fewer BT shares when the merger goes ahead, but more cash. Each MCI investor will now receive 3.75 BT shares, plus $7.75 in cash, compared with the 5.4 BT shares and $6 in cash in the original proposals.
As a result, MCI shareholders will end up owning just a quarter of Concert, instead of the 34 per cent in last November's merger terms. To compensate for the loss, BT has agreed to pay out almost $1bn (pounds 600m) more in cash to MCI investors. Because of the reduced share element of the revised deal, Concert will have 10 per cent fewer shares in circulation than anticipated.
But MCI shareholders were dealt a further blow, with news that they will not now begin receiving dividends from Concert until the next financial year, starting in April 1998. Under the old deal they would have been paid the final Concert dividend for the whole of 1997/98, worth a forecast 18.5p a share according to analysts.
The difference means BT will now pay out about pounds 630m less in dividends this year than it would otherwise have done, more than making up for the extra cash paid out through the revised merger terms. "Let's just say the Lord giveth and the Lord taketh away," one analyst said yesterday.
BT said the merger would lead of "modest" falls in its earnings this year and next year, knocking about pounds 90m off profits compared to if BT had stayed independent, equivalent to 1p a share.
But analysts yesterday kept their dividend forecasts unchanged yesterday, implying a yield on Concert shares of more than 5 per cent. The company said it still intended to deliver "double digit" dividend growth in the long term.
BT also warned that the revised deal would raise its gearing - the ratio of debt to equity - from up to 90 per cent projected under the previous terms to 120 per cent. The extra debt would come not just from losses on MCI's local phone market business but also from the pounds 500m windfall tax bill in the UK and BT's higher pensions bill following Budget changes to tax breaks on dividends.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments