Ma Bell to re-unite with Baby Bell

SBC to acquire AT&T

SBC Communications Inc. said yesterday that it would buy AT&T Corp. for around $15.7 billion, making SBC the largest U.S. telecommunications company and ending the independence of the company that created the telecommunications industry over a century ago and is still one of the world's most recognized corporate names.

Former Federal Communications Commission chief Reed Hundt had deemed a reunion of AT&T with one of the companies spun off in a 1984 government anti-trust action "unthinkable" in 1997. But since then AT&T has had a steep decline in fortunes. (See next post up for a discussion of my thoughts on this.) Even so, the $16 billion deal may take until mid-2006 to clear intense regulatory scrutiny.

SBC will issue 0.78 of a share for each AT&T share, valuing AT&T at $18.41 a share. AT&T will then pay a special cash dividend of $1.30 a share. Combined, the deal would value AT&T at $19.71 a share, equal to its closing stock price on Friday. No premium!! The total price would thus be $14.7 billion in SBC stock and $1.0 billion for the special cash dividend.

Analysts have criticized the $16 billion purchase price for the deal as too much for a company with shrinking revenues and questionable growth prospects.

Sources:
Reuters (at Yahoo Finance)
Associated Press (at Yahoo Finance)

Something which neither of these stories mentions, but which was in a story in this morning's AJC, is that this deal may strain relations between SBC and BellSouth (SBC's partner in the Cingular Wireless joint venture) because BellSouth has long wanted to acquire AT&T but could not settle on terms with the AT&T board.

[edited to add link to AJC story]