Bell-Nynex merger problems ironed out Management issues reportedly resolved

board action awaited


Bell Atlantic and Nynex resolved the remaining management issues yesterday that stood in the way of their merger, an executive familiar with the talks said.

While investment bankers for the companies were still negotiating about how to value the shares of Nynex, the executive said they had narrowed the gap to "a very small difference."

Executives of Bell Atlantic and Nynex have begun briefing board members of both companies about the merger, which would create the nation's second-largest telephone company after AT&T.

While the bankers hammered out final terms, the executives were "fixing the punctuation" on a news announcement, which the companies expect to issue Monday.

Bell Atlantic's board planned to meet today to consider the proposal, but another executive cautioned that it would probably not vote on the merger until tomorrow.

Nynex's board does not plan to hold a meeting, an executive close to Nynex said, but will discuss the merger in a telephone conference call today before voting tomorrow.

Because Nynex seems likely to accede to a deal which values its shares at slightly less than their current market value, executives from both companies have devoted their energy in recent days to resolving delicate questions about who would be running the combined enterprise.

Under the terms of the deal, Raymond Smith, the chairman of Bell Atlantic, and Ivan Seidenberg, the chairman of Nynex, would remain in their current posts while the two companies completed the merger process -- roughly one year from the day the deal is announced.

Mr. Smith, 58, would become chairman of the combined company for one year after that. He would then be succeeded by Mr. Seidenberg, 49.

In a concession by Bell Atlantic, three executives would hold the title of vice chairman under Mr. Smith, and later, under Mr. Seidenberg. They are James Cullen and Lawrence Babbio, both vice chairmen of Bell Atlantic, and Frederick Salerno, vice chairman of Nynex.

Mr. Cullen and Mr. Babbio are both viewed as more forceful executives than is Mr. Salerno, people close to the companies said, and some industry executives had expected that they would be assuming the principal deputy roles.

But for a transition period at least, the three executives would wield equal authority.

People close to the talks said it was still not clear how this arrangement would sit with Mr. Cullen and Mr. Babbio over the long term. Both executives have been very much in contention for Mr. Smith's job at Bell Atlantic -- a goal that now seems out of reach.

Executives at Nynex and Bell Atlantic conducted this last phase of the marathon negotiations by telephone yesterday.

Early this week, a team from Bell Atlantic traveled from Arlington, Va., to New York for meetings with Nynex. And bankers for the two companies were still meeting there yesterday to agree on how to value Nynex shares.

In the deal, shareholders of both companies would swap their existing shares for new shares in a combined company.

Based on the historic trading patterns of both companies, shareholders would transfer their shares at a ratio of six shares of Bell Atlantic for every five Nynex shares. Bell Atlantic's shareholders would end up owning more than half the combined enterprise.

Because takeover speculation has driven up the price of Nynex's shares, Bell Atlantic has argued that -- for purposes of the merger -- Nynex ought to be valued at a modest discount to its market capitalization.

People familiar with the negotiations said yesterday that Nynex seemed willing to accept a slight discount to its market value. Yet the rumors about a discount may have helped erase the gap between Nynex's market value and that of Bell Atlantic.

Analysts said that yesterday's speculation about a below-market deal caused Bell Atlantic's stock to jump $2.50 a share, to $65, in heavy trading on the New York Stock Exchange. Nynex's shares rose only 25 cents, to $53.

The rise in Bell Atlantic shares, however, also could be attributed to the surprisingly robust earnings that the company reported Thursday. The company's first-quarter earnings advanced 13.5 percent, to $470.5 million, on revenue of $3.2 billion, exceeding the expectations of many analysts.

At $65 and $53, respectively, Bell Atlantic and Nynex are valued very close to the 6-to-5 ratio that Bell Atlantic's bankers originally envisioned in putting the merger together.

Pub Date: 4/20/96

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