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BREAKFAST WITH THE FOOL
WorldCom Takes Control of Digex

By Brian Graney (TMF Panic)
September 5, 2000

As first reported by The Wall Street Journal this morning, telecommunications carrier WorldCom Corp. (Nasdaq: WCOM) has reached an agreement to buy Tampa, Florida-based competitive local exchange carrier Intermedia Communications (Nasdaq: ICIX) for $39 per share. The total purchase price works out to $6 billion, consisting of $3 billion in equity and $3 billion in debt and preferred stock.

Buying Intermedia gives WorldCom control over Web-hosting business Digex (Nasdaq: DIGX), which has been for sale since July despite receiving a number of acquisition bids. Intermedia owns 55% of Digex and controls a 94% voting stake in the company, whose data services will nicely complement WorldCom's UUNet Internet backbone business. Separate deals involving Digex were proposed by fellow Web-hosting outfits Exodus Communications (Nasdaq: EXDS) and Global Crossing (Nasdaq: GBLX) over the past few months but didn't pan out, according to the Journal.

"WorldCom and Digex will offer an unmatched, comprehensive suite of access, transport, and applications solutions to customers around the globe," WorldCom president and CEO Bernard Ebbers commented. However, there was no mention in the merger press release regarding WorldCom's plans for the 45% stake in Digex that will remain publicly traded or what it intends to do with the rest of Intermedia's telecom-related assets.

News to Go

According to various reports, the Federal Trade Commission is considering a move to block the landmark merger of online services company America Online (NYSE: AOL) and media conglomerate Time Warner (NYSE: TWX) unless certain concessions are made, most notably the opening up of Time Warner's cable TV lines to rival broadband service companies. The Wall Street Journal reported that the companies might also face restrictions on their future dealings with telecom company AT&T (NYSE: T), while The Washington Post suggested that AOL may be required to ditch its $1.5 billion investment in digital satellite services company Hughes Electronics (NYSE: GMH).

E-business consulting firm iXL (Nasdaq: IIXL) said after the close on Friday that a client purchasing slowdown and an increased sales cycle will result in a 15% to 20% sequential drop in revenues for Q3 and an unspecified net loss for the period. The First Call mean estimate had called for earnings of $0.04 per share. Additionally, the firm said William Nussey has stepped down as president and as a director. The company will be holding a conference call this morning that can be accessed via www.vcall.com.

London-based electric power company National Grid announced that it is acquiring Syracuse, New York-based electric and gas utility Niagara Mohawk (NYSE: NMK) for about $8.9 billion in cash, stock, and assumed debt. The Niagara Mohawk deal comes less than six months after National Grid completed a $3 billion acquisition of Massachusetts-based New England Electric System.

Laboratory supplies and equipment firm Fisher Scientific (NYSE: FSH) and specialty medical products marketer and distributor PSS World Medical (Nasdaq: PSSI) announced that they have mutually agreed to call off their proposed merger. When first announced on June 22, the size of the stock swap was $840 million. However, the deal's size had shrunk to roughly $485 million by Friday due to a 42% decline in Fisher's stock over the past two months.

Check out Friday's Foolish market wrap-up with just one click.

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