Monday, May 17, 1999

"Fools rush in where Wise men fear to trade." -- Peter Drucker

Latest Market Numbers

US WEST Goes Global

Global Crossing (Nasdaq: GBLX) and US WEST (NYSE: USW) announced that they will merge in a complex deal that will create a new entity with a market capitalization of more than $75 billion. Including the numbers for Frontier Corp. (NYSE: FRO), which is being acquired by Global Crossing, the three companies had combined 1998 sales in excess of $15 billion; earnings before interest, taxes, depreciation, and amortization (EBITDA) of more than $6.2 billion; and over 63,000 employees.

The new company will take the Global Crossing name, though it will be 50% owned by Global Crossing/Frontier shareholders and 50% owned by US WEST shareholders. It will provide a seamless end-to-end, local-to-global broadband telecommunications and data services network. It will have more than 115,000 combined route miles, more than 2.8 million fiber miles, and a network linking 19 countries and 185 cities. The heads of the two companies will share the responsibilities of co-chairmen and co-CEO.

As part of the transaction, US WEST will make a cash tender offer for about 9.5%, or 39 million, of Global Crossing's shares outstanding for $62.75 per share. That's a slight 2% premium to Global Crossing's close Friday of $61 3/8 ($61.375). The tender offer will begin within five business days and is expected to be completed next month.

The new company will establish two separate tracking stocks: Global Crossing "Class G" (Global) shares will track the high-growth global data and voice network and Internet assets and won't pay a cash dividend. Global Crossing "Class L" (Local) shares will track local telecommunications assets and pay an attractive dividend. The merger is expected to be immediately accretive to Class G operating cash flow and Class L earnings per share.

US WEST shareholders will get around 1.2 shares of Class G or Class L Global Crossing stock for each US WEST share, while Global Crossing shareholders will exchange each of their shares for one share of either of the two Global Crossing tracking stocks. All shareholders can choose to receive differing percentages of the two tracking stocks.

Click here to access a Webcast of the Global Crossing/US WEST press conference this morning at 11:30 a.m. Eastern time.

News to Go

Defense contractor General Dynamics (NYSE: GD) said it will acquire Gulfstream Aerospace Corp. (NYSE: GAC) in a one-for-one stock swap, valuing Gulfstream at $71.44 a share, or roughly $5.3 billion, based on Friday's close. That represents a 28% premium to Gulfstream's closing price Friday of $55 5/8 ($55.625). This deal is expected to be "immediately -- and handsomely -- accretive to earnings and cash flow." [To listen live to this morning's conference call at 9:30 a.m. Eastern, dial (800) 852-5279 from the U.S. and Canada and (303) 267-1006 from elsewhere. A replay will be available for a week starting at 11 a.m. today. From the U.S. and Canada: (800) 625-5288, international: (303) 804-1855, reservation number: 547462.]

Online retailer Amazon.com (Nasdaq: AMZN) today begins selling New York Times bestsellers at a 50% everyday discount. The discount applies to hardcover and paperback titles in the list's three categories: fiction, nonfiction, and advice/how-to/miscellaneous -- at least 68 titles each week.

Xerox Corp. (NYSE: XRX) and Microsoft (Nasdaq: MSFT) have reached a broad technology and product alliance that will enable Xerox digital copiers to easily connect to computer networks running Microsoft software, The Wall Street Journal reported. The deal is expected to be announced Tuesday.

Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) reported first-quarter earnings before investment gains and goodwill amortization of $405 million, or $267 per Class A share -- a 23% decline from $523 million, or $345 per share, a year ago (Motley Fool estimates of pro-forma performance). The decline in earnings was due to a $153 million swing in GenRe reinsurance underwriting performance as well as lower rates and higher promotional expenses at the company's GEICO auto insurance unit. Don't miss our Foolish coverage of Berkshire's annual meeting earlier this month.

Equipment company New Holland NV (NYSE: NH) announced it will acquire Case Corp. (NYSE: CSE) for $4.3 billion, or $55 a share, in cash -- a 23% premium to Case's close Friday of $44 13/16 ($44.8125). The companies project attaining annual savings of $400-$500 million within three to four years.

Drug makers Hoechst AG (NYSE: HOE) and Rhone-Poulenc SA (NYSE: RP) agreed to merge in a 20.5 billion-euro ($21.84 billion) stock swap that gives Hoechst shareholders 53% of the new company, to be called Aventis SA, which will be the world's largest drug company.

Internet-based medical data management firm Healtheon Corp. (Nasdaq: HLTH) and WebMD Inc. (www.WebMD.com) reportedly are in merger talks and close to coming to an agreement, according to The Wall Street Journal. A deal would end a week of speculation about WebMD, which last week asked the SEC for permission to withdraw its registration statement for an initial public offering (IPO). Separately, Microsoft reportedly had offered to buy about 25% of WebMD, but the status of that offer is uncertain.

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor