CONTACTS:
| News Media: | Investors: |
|---|---|
| MFS: Josh Howell 402/977-5243 | MFS: Gary Brandt 402/977-5314 |
| UUNET: Paula Jagemann 703/206-5960 | UUNET: Paula Jagemann 703/206-5960 |
MFS AND UUNET ANNOUNCE MERGER AGREEMENT
TO FORM PREMIER INTERNET BUSINESS COMMUNICATIONS COMPANY
Microsoft, Minority Shareholder And Major Customer,
Pledges Support
Joint Conference Call Scheduled
Omaha, Nebraska, April 30, 1996 - MFS Communications Company, Inc. (MFS) and UUNET Technologies, Inc. (UUNET) jointly announced that the two companies have executed a merger agreement.
Under the terms of the agreement, each share of UUNET stock will be converted into 1.777776 shares of MFS common stock, on a post-split basis. At yesterday's closing, the transaction value is approximately $2 billion. The merger agreement was unanimously approved by the Board of Directors of each company and the transaction will be recommended by each board to its shareholders. In addition, shareholders of UUNET owning approximately 62 percent of the outstanding shares and shareholders of MFS owning approximately 12 percent of the outstanding shares have committed to vote in favor of the transaction.
The Combined Company
The merger will create one of the world's premier business communications companies, providing a single source for a full range of Internet, voice, data and video services -- over its advanced international fiber network. The combined company will be the only Internet service provider to own or control fiber optic local loop, intercity and undersea facilities in the United States as well as the United Kingdom, France and Germany.
The combined company will have current monthly annualized revenue of approximately $1.02 billion, with over 50,000 business customers in North America, Europe and Asia served by 4,200 employees. At the heart of the combined company is an international network platform interconnecting 543 Internet points of presence (with 288 outside the U.S.), 7,400 buildings, 218 local exchange carrier (LEC) central offices, 16 local/long-distance switches, 213,000 fiber miles and 7,462 international voice grade equivalent circuits.
"This merger is especially compelling because of the unique fit between MFS and UUNET," said James Q. Crowe, Chairman and CEO of MFS. "Because there is substantial overlap between our networks, we can improve our margins in a number of ways including:
"First, since over 40 percent of UUNET's network expenses are for local communications services, we expect to derive significant savings from this important cost element. Second, by combining purchasing power for international and domestic leased circuits, we expect to further reduce expenses. Third, by collecting co-carrier payments for dial-up Internet access, we expect to further improve operating margins. And finally, and perhaps most importantly, the full range of UUNET's Internet services will be sold by MFS' 1,200 sales and marketing professionals."
Microsoft Supports Merger
In December 1994, UUNET and Microsoft entered into a strategic relationship for the development, operation and maintenance of a large-scale high speed dial-up and ISDN TCP/IP access network, which is the primary Internet network infrastructure for Microsoft, including The Microsoft Network (TM). This relationship has provided UUNET with the opportunity to accelerate the expansion of its network both domestically and internationally. Additionally, Microsoft has a 13 percent equity position in UUNET and a Microsoft representative serves on UUNET's Board of Directors.
"Our relationship with UUNET has been extremely positive over the past year and they have helped us deploy The Microsoft Network(TM) rapidly, and with high quality," said Bill Gates, Chairman and CEO of Microsoft. "We are highly supportive of this merger with MFS, since the combination of a facility based telecommunications carrier with a high quality Internet service provider offers the potential for high bandwidth availability at lower costs for end users."
John W. Sidgmore, UUNET CEO said, "We see this merger as a natural evolution of our Internet vision -- with high capacity fiber optic infrastructure supporting a full array of Internet services and technologies. We need state-of-the-art, strategically located fiber optic networks to provide enhanced Internet services to our business clients. We view MFS as having the premier network infrastructure required to complement our entire range of services. This combination will create what, we believe, will be the premier full service Internet business communications company."
MFS and UUNET believe that UUNET's customer base, networking infrastructure and strategic alliances will accelerate MFS' network expansion into Western Europe and expedite network development in Asia and North America.
"As this network infrastructure is expanded into new markets, I believe the combined company will be in a strong position to offer a broad range of services from Internet access to corporate networks based on Internet technologies," said Rick Adams, founder, Chairman and Chief Technical Officer of UUNET. "The demand for bandwidth will continue to accelerate as more businesses demand Internet-based applications," said Adams. "The combined company's network platform will be well positioned to meet that need."
Both companies are serving the same market segment. The companies believe that, together, they can provide a single source for the full range of business communications and Internet services. Because of UUNET's industry leadership as an Internet Service Provider and MFS' international high-bandwidth network platform, the companies believe they are among the best positioned to benefit from the accelerating shift to Internet-based communications.
"We've worked together for a number of years and consider them to be the leading provider of Internet service to business," said Crowe. "Together, we're going to develop a whole new kind of entrepreneurial organization -- one that provides the highest quality of service to the most demanding business customers. At the same time, we are going to adapt quickly to rapidly changing technology and apply that technology for our customers."
Sidgmore to Continue As UUNET CEO
MFS Communications will now have two groups, Telecommunications Services led by Royce J. Holland and Internet Services, led by John Sidgmore.
"We are bringing together two great companies," said Crowe. "We recognize and respect the success they've achieved. We expect to learn a great deal from each other. Over time, we will build on the best of both companies.
"John Sidgmore is a strong manager and an industry leader," said Crowe. "He will continue to lead UUNET, and I will support him in every way possible. John Sidgmore will remain president and CEO of UUNET and upon closing, he will become a member of the MFS board of directors and UUNET will also nominate two additional board members."
"Jim Crowe and I are cut from the same cloth," said Sidgmore. "We are both entrepreneurs who share the same view of where the industry is going and what we need to do to maintain a leadership position.
"Our companies have a great deal in common. Both were founded in 1987 and both have continued to experience dramatic growth. We both share entrepreneurial cultures and a passion for customer service. Both companies share a singular focus on serving the needs of business customers. Together, I believe our combined company will serve the needs of our customers exceptionally well."
MFS to Use Purchase Accounting Treatment
MFS anticipates that a substantial portion of the purchase price will be allocated to intangible assets including goodwill and expects to amortize those intangible assets over a period of up to five years. The actual allocation of the purchase price will be made after further evaluation of UUNET's assets.
Uncertainties Relating To Forward Looking Statements
This press release contains forward looking statements that involve risks and uncertainties, including the satisfaction of the conditions to the transaction and the successful integration of MFS and UUNET, competitive and regulatory risk associated with the telecommunications and Internet industries, and other risks detailed from time to time in the SEC reports filed by MFS and UUNET, including the report on Form 10-K filed by MFS for the year ending December 31, 1995, and the report on Form 10-K filed by UUNET for the year ended December 31, 1995. Actual results, events and performance may differ materially.
Consummation of the transaction is subject to typical conditions including action by the shareholders of each company and Hart-Scott-Rodino clearance.
Headquartered in Fairfax, Va., UUNET Technologies, Inc., together with Unipalm and its related entities, is a leading provider of a comprehensive range of Internet access options, applications, security products, and consulting services to businesses, professionals, and on-line service providers. UUNET's network is comprised of points of presence throughout the United States and in Canada, Europe and the Asia-Pacific region, as well as connections to Internet service providers around the world. Founded in 1987, UUNET is recognized as the first commercial Internet service provider. UUNET's common stock is traded on the Nasdaq National Market under the symbol UUNT.
MFS is a leading provider of communication services for business and government. Through its operating company subsidiaries, MFS provides one-stop shopping for integrated local and long-distance services as well as a wide range of high quality voice, data and other enhanced services and systems specifically designed to meet the requirements of business and government customers. MFS' common stock is traded on the Nasdaq National Market under the symbol MFST. MFS is headquartered in Omaha, Nebraska.
CONFERENCE CALL SCHEDULED
MFS Communications Company, Inc. and UUNET Technologies, Inc. have scheduled a joint conference call on Tuesday, April 30 at 8:30 a.m. (Eastern Time) with James Q. Crowe, Chairman and CEO of MFS and John W. Sidgmore, CEO of UUNET, to discuss the above announcement. Following this presentation, Mr. Crowe and Mr. Sidgmore will respond to questions.
Afterwards, UUNET will present its First Quarter 1996 Financial Results.
IF YOU WISH TO PARTICIPATE, PLEASE CALL 1-719-448-2006. PLEASE REFER TO CONFIRMATION NUMBER 232507.
The conference call will be rebroadcast starting on Tuesday afternoon, April 30, 1996, and continuing through Friday close of business, eastern time. To hear the rebroadcast call 402/737-0594.