WorldCom Strikes
Three-dimensional Deal

The deal requires that WorldCom sell its stake in Intermedia, not its controlling interest in Digex, in order to gain regulatory approval from the Justice Department.

by ISP-Planet Staff [March 7, 2001]

WorldCom, Inc., Intermedia Communications, Inc. and Digex Inc. agreed to a final settlement of a lawsuit, which resulted from WorldCom's bid to acquire a controlling interest in Digex through a merger with Intermedia.

On Feb. 15, the three of a kind companies said they had proposed a settlement with Digex shareholders that filed the lawsuit. A court hearing on the settlement is set for April 6.

The deal requires that WorldCom sell its stake in Intermedia, not its controlling interest in Digex, in order to gain regulatory approval from the Justice Department. The companies expect the merger agreement to close during the second quarter of this year.

Spending spree
As part of the settlement, each Intermedia share would be exchanged for one share of WorldCom, instead of 1.1872 shares as originally stipulated in the September 2000 merger bid. WorldCom would also pay Digex shareholders about $ 165 million in WorldCom stock and $15 million to Digex for various settlement costs.

In addition, Digex has said WorldCom agreed to fund it for the next two years and commit up to $500 million in revenue over three years under a sales-channel agreement.

WorldCom agreed to buy Intermedia in a deal then valued at $3 billion plus the assumption of $3 billion in debt as a way to gain control of Digex, which is 54 percent owned by Intermedia.

The lawsuit of minority shareholders of Digex alleged the merger pact improperly waived anti-takeover protections. In December, a Delaware Chancery Court judge declined to grant an injunction but warned that the anti-takeover waiver could subject WorldCom and Intermedia to damages sought by Digex.

—End