May 6, 1997 3:00 PM PDT
BBN deal hurts GTE stock
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Merger rumors fuel BBN stockApril 28, 1997
Shares of GTE fell today to close at 45-1/8, down 2-1/4 from yesterday. BBN, meanwhile, rose 28 percent to close at 29, up 6-3/8 from yesterday.
Although GTE has previously said its growth rate is expected to reach more than 10 percent in the "foreseeable future," the acquisition is expected to result in flat to slightly positive earnings growth in 1997, moderate growth in 1998 and growth in 1999 of more than 30 to 50 percent.
The deal, which ends rumors of a merger between BBN and AT&T, is expected to help GTE diversify its core business as a local telephone company by adding a new online dimension. It may also be a blow to AT&T, the world's largest telecommunications company.
GTE will pay $29 a share in a cash tender offer to acquire all of BBN's outstanding common stock. Then, the company will start the merger process, converting remaining BBN shares not owned by GTE into cash at the tender offer price, the company said.
GTE seeks one-stop
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The Cambridge, Massachusetts-based ISP acknowledged today that an AT&T acquisition had been discussed but said the talks have been canceled. The two companies have entered dispute resolution procedures to resolve "material disagreements regarding the terms of the contract," BBN said in a statement.
"These disagreements may limit the number of new AT&T customers being added to BBN's network," it said. Current AT&T customers, who rely on BBN for a variety of Net access services, will not be affected by the dispute, the company added.
The merger announcement comes on the same day that BBN posted a net loss of $12.2 million, or 58 cents per share, for the third quarter ending March 31. The company also posted a loss at this time last year, of $29.1 million, or $1.64 per share. BBN has lost $13.1 million, or 61 cents per share, for the nine-month period ending in March, the company stated.
However, revenues for the quarter were up significantly this year. The company posted a nearly sixfold increase to end the period with $95.9 million in revenues. For the March 1996 quarter, it reported revenues of $60.8 million. BBN attributed the recent revenue growth to the performance of BBN Planet and its interactive services division.