BREAKFAST WITH THE FOOL
Friday, August 6, 1999
"There is only one success -- to be able to spend your life in your own way."
-- Christopher Morley
Deutsche Telekom to Buy One 2 One
Europe's largest phone company Deutsche Telekom AG (NYSE: DT) will acquire U.K. mobile phone company One 2 One from Cable & Wireless PLC (NYSE: CWP) and MediaOne Group (NYSE: UMG) for 8.4 billion pounds ($13.56 billion) in cash and assumed debt. Deutsche Telekom will pay the 50-50 joint venture partners 6.9 billion pounds in cash (including repayment of 237 million pounds of shareholder loans) and assume about 1.5 billion pounds of third-party debt.
The sale represents a great return on investment for Cable & Wireless and MediaOne. The partners originally invested around 300 million pounds each in the venture. Cable & Wireless said it will use its share of the sale proceeds to reduce debt and to fund its ongoing capital expenditure program. AT&T (NYSE: T) is in the process of buying MediaOne.
Since its launch in September 1993 as the world's first 1800-GSM Personal Communications Network, One 2 One has increased its subscriber base roughly 90% per year over the last two years to 2.65 million subscribers as of June 30. One 2 One's network recently reached 97% coverage of Britain's population. It handles more than 130 million calls per week.
News to Go
Sweden's AB Volvo (Nasdaq: VOLVY) will acquire Investor AB's 49% stake in rival bus and truck maker Scania AB (NYSE: SCV.A) for 60.7 billion kronor ($7.4 billion) in cash and stock, creating the world's second-largest maker of heavy trucks and buses. The deal will give Volvo 69.6% of the votes in Scania. At the same time, Investor AB will become Volvo's largest single shareholder.
Of 156 Internet-related initial public offerings this year, 37% were below their offering price as of Thursday's close, according to data compiled by CommScan LLC, The Wall Street Journal reported. The performance is even worse when compared with the first day of trading -- 68% were below their first trade price after going public, and 70% were below the price at which they finished their first day of trading.
Britain's Inland Revenue tax authority is auditing IBM (NYSE: IBM) in an effort to determine whether the company improperly avoided taxes there by having its British unit pay artificially high royalties to the parent company, according to The Wall Street Journal. The inquiry was sparked by allegations by Gerard Churchhouse, a former IBM manager in sales and marketing, who alleged that IBM avoided paying as much as about $500 million in U.K. taxes between 1991 and 1996.
Web-hosting company Verio Inc. (Nasdaq: VRIO) reported a second-quarter loss of $1.22 a share compared with a loss of $1.44 a year ago and analysts' expectations of a loss of $1.30. Revenues increased 117% year-over-year to $61.9 million from $28.5 million.
Foamex International (Nasdaq: FMXI), which makes flexible polyurethane and advanced polymer foam products, announced it has signed a letter of intent with privately held Sorgenti Chemical Industries LLC and private investment firm Liberty Partners Holdings 20, LLC for a business combination valuing Foamex at $11.50 per share.
David Gardner looks back on the Rule Breaker Portfolio's purchase of America Online five years ago and admires AOL's persistence... Check out a StockTalk interview with the CEO of Adobe Systems... Get the lowdown on July retail sales figures.
Yi-Hsin Chang (TMF Puck)
Remember to start each business day with Breakfast With the Fool at 9 a.m. Let us know what you think of this feature. Send all comments and suggestions (including Foolish quotes) to the Breakfast Fools.