WorldCom has agreed to buy Intermedia Communications for about $6bn in stock and debt to gain control of Digex, a provider of managed web and application hosting services.
The US telecoms giant will pay $3bn in cash and stock, and also take on $3bn in debt assumption. Under the terms of the agreement, each share of voice and data service provider Intermedia's common stock will be exchanged for $39 of WorldCom common stock.
After the deal is completed, WorldCom will own about 55 per cent of Digex's equity interest and 94 per cent of the provider's voting interest, according to the companies. The remaining 45 per cent of Digex's stock will remain publicly traded.
WorldCom chief executive Bernard Ebbers said the merger will strengthen both Digex and WorldCom by creating premier web hosting products and services.
The companies will offer a "comprehensive suite of access, transport and applications solutions to customers around the globe", he said.
The acquisition will enable WorldCom's UUNet ISP unit, which offers web hosting services, to expand its operations.
Ebbers said WorldCom currently offers web hosting services through UUNet, but this deal would "enhance our offerings by accelerating WorldCom's expansion into web-based hosting services by 12 to 18 months".
Jeffrey Kagan, an independent telecoms analyst at Kagan Telecommunications Associates, said the deal will help WorldCom "move beyond the network opportunities and let them cash some of the big checks in the web hosting and ecommerce side of the fence".
Intermedia is one of the biggest independent operators of voice and data networks. WorldCom defeated several rivals, including Exodus Communications and Global Crossing, in acquiring the company. Other competitors in the market include Qwest Communications and AT&T.
Shares in Intermedia rose by $8.61 to $31.48 while WorldCom's fell by $3.19 to $33.75 in yesterday's trading. WorldCom and Intermedia said their boards approved the transaction, which they expect to be completed early next year.
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