SBC to acquire AT&T for $16B

IDG News Service - SBC Communications Inc. plans to acquire AT&T Corp. in a deal worth $16 billion, the company said this morning. The deal will create the largest telecommunications carrier in the U.S.
"Today's agreement is a huge step forward in our efforts to build a company that will lead an American communications revolution in the 21st century," said SBC Chairman and CEO Edward Whitacre in a statement.
Whitacre will remain in his current position, while AT&T Chairman and CEO David Dorman will become president of the merged company, to be based in San Antonio, where SBC has its headquarters.
Under terms of the agreement, shareholders of AT&T will receive 0.77942 shares of SBC common stock for each common share of AT&T, the statement said. Based on the Jan. 28 closing price of SBC's stock, this exchange ratio equals $18.41 per share. In addition, AT&T will pay its shareholders a special dividend of $1.30 per share, bringing the total consideration for each AT&T share to $19.71 and valuing the deal at around $16 billion, it said.
The acquisition, which is subject to approval by AT&T's shareholders and U.S. regulatory authorities, is expected to close by the first half of 2006, the statement said.
The combination of AT&T and SBC will reunite "Ma Bell" with a "Baby Bell," a union that former Federal Communications Commission chief Reed Hundt called "unthinkable" in the late 1990s.
But AT&T's market dominance has shrunk steadily since the government broke up its monopoly in 1984, splitting the operator into seven local Bell operating companies and a long-distance operation.
In a move to expand beyond its core long-distance business, which had come under fierce price pressure, AT&T spent billions early last decade to acquire a mobile phone operator and broadband cable companies. Struggling under its huge debt, AT&T was later forced to shed its wireless and cable operations. AT&T Wireless Services Inc. was acquired by Cingular Wireless LLC, a joint venture between SBC and BellSouth Corp.
SBC, which has grown from the smallest of the Baby Bells to become a company with more than 50 million local-calling customers, had been looking for ways to make inroads with large business and government customers, both in the U.S. and globally.
AT&T serves almost every Fortune 1,000 member. Moreover, the company has one of the world's largest communications networks, spanning more than 50 countries. It operates 26 Internet data centers, half of which are in the U.S.
For AT&T, the acquisition will end its more than 125-year history, which began with the inventionof the telephone.
Although the role of the well-known AT&T brand name in the new company is still unclear, it won't disappear, according to Whitacre. "We value the heritage and strength of the AT&T brand, which is one of the most widely recognized and respected names throughout the world, and it will certainly be part of the new company's future," he said in the statement.
The announcement of a deal between the two companies had been expected. Last week, The New York Times and The Wall Street Journal reported that SBC and AT&T were in talks about a deal that would create the largest telecommunications carrier in the U.S (see story).