Bell's deal with Nynex turns into a takeover Merger plan altered to skirt 1913 law

June 27, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

Bell Atlantic Corp. and Nynex Corp. are changing the shape of their $20.5 billion merger in a bid to sidestep a 1913 law requiring congressional approval of the sales of utilities that serve Washington, D.C., the two companies said yesterday.

Confirming a report in the Wall Street Journal, the two phone companies said the deal originally structured as a merger of equals is being reorganized so Bell Atlantic will take over Nynex.

That way, Bell Atlantic, which serves Washington, will not be sold and the need for congressional approval will be skirted, said Bell Atlantic spokesman Eric Rabe.

"It's a legal and technical move to avoid having to get an act of Congress passed," he said, adding that the companies feared the act would not be approved until mid- to late-1997. "There's going to be an election. They're obviously focused on other things."

The boards of the two companies must approve the restructuring of the deal.

In a way, the move confirms what industry watchers thought was occurring all along -- that Bell Atlantic was taking over Nynex, a competitor often criticized for reacting less swiftly and adeptly than Bell Atlantic to opportunities presented by deregulation.

That view was bolstered by the fact that the combined company was to be called Bell Atlantic, even though a "new" Bell Atlantic was to be created by issuing shares of the new company to both Nynex and Bell Atlantic shareholders in exchange for their existing stock.

In the new deal, Rabe said, holders of existing Bell Atlantic shares will keep their stock and Nynex holders will get stock in the existing Bell Atlantic.

"It's the mathematical equivalent" of the initial deal proposed in April, Rabe said.

He insisted that the deal is not a true takeover, because each company will be equally represented on the new firm's board of directors and because neither side's shareholders are being paid a premium price for their stock, as is customary during buyouts.

The stock market didn't seem to think the change was a big one. Nynex shares slid 12.5 cents to $45.75 yesterday. Bell Atlantic was unchanged at $61.25.

The restructuring also means that Bell Atlantic believes it will not have to seek approval for the deal from regulators in states where it is the primary local phone company before the merger.

But Rabe said Bell Atlantic will still meet with all state regulators and provide any information they want about the merger, if only to prevent ill will that would affect Bell Atlantic's pricing plans or other regulatory affairs.

Peter Krasilovsky, senior analyst at the Bethesda telecommunications consulting firm Arlen Communications, said the restructured deal could make things tougher with regulators in Nynex's territory, which covers New York and New England.

If Nynex is taken over completely, he said, union appeals might lead home-state regulators to impose conditions before they approve.

"It's going to stir up some trouble, but whether it's a deal-breaker I don't think it will be," Krasilovsky said.

"It doesn't really change anything."

Pub Date: 6/27/96

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