The proposed $11.2 billion acquisition of Frontier Corp by Global Crossing Ltd could create a new communications giant to take on long-established carriers in the US and Europe.
The plan is to offer global voice, web hosting, private line, ATM and Internet services, and based on announced networks, the combined company will have 71,000 route miles, over 1 million fibre miles, and offer ultra-high bandwidth to 159 cities in 20 countries.
Global Crossing, headquartered in Bermuda, builds and operates international fibre-optic networks, while the Rochester, New York-based Frontier Corp is a long-distance communications and Internet company with a significant US presence in over 32 states.
Robert Annunziata, chief executive officer of Global Crossing, commented: ?We will now have a strong US infrastructure to complement the IP-based fibre network we are building in Europe, Japan, Mexico, and Central and South America. These are two complementary companies with no overlap, and together we will be ideally positioned to meet the exploding demand for bandwidth to handle Internet, data, video and voice transmissions.?
Both boards have approved the agreement and Frontier?s shareholders will receive Global Crossing shares valued highly at $62, and Frontier?s stock rose by 13 per cent to $50.50 on news of the acquisition.
The merged company will be two-thirds owned by Global Crossing, and it has a combined current market value of almost $30 billion, with combined annual sales of $4 billion, $1 billion in pre-tax earnings and over 8,000 staff.
Reaction was mixed in the US with some analyst expressing reservations that the two-year old Global Crossing can compete successfully with the likes of MCI and AT&T.
Joseph Clayton, Frontier?s CEO, will become a vice chairman of Global Crossing, and Rolla Huff, Frontier?s president and COO, will be president and COO of Global Crossing's North American operations. Four Frontier directors will join the Global Crossing Board of Directors.
The acquisition should be completed in the third quarter of 1999.
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