WorldCom Buys Intermedia

J A C K S O N, Miss., Sept. 5 -- WorldCom, the No. 2U.S. long-distance telephone company, said today it wouldbuy telecoms operator Intermedia Communications in a $3 billionstock deal that would expand WorldCom’s Internet-hostingbusiness.

The company said in a statement that it also would assume$3 billion in Intermedia debt.

WorldCom and Tampa, Fla.-based Intermedia said today inannouncing the deal that their boards approved the transaction onFriday.

The deal is subject to approval by shareholders and by the U.S.Department of Justice and Federal Communications Commission.

WorldCom is the nation’s second biggest long-distance serviceprovider after AT&T Corp. It abandoned a plan to buy No. 3 SprintCorp. for $129 billion earlier this year in the face of regulatoryopposition.

WorldCom will pay $39 for each of Intermedia’s outstandingshares, or approximately $2.9 billion.

90,000 Customers

Intermedia provides voice and data services to more than 90,000business and government customers across the United States and islisted as one of the nation’s top independent competitive localexchange carriers.

Intermedia offers local and long-distance service and providesInternet and data services through its 64 percent stake in Digex,a Web-hosting firm.

WorldCom said it would gain a controlling stake in Digex, which has been up for sale since July.

Worldcom said that under a merger agreement it andIntermedia had signed, Worldcom would own 55 percent of Digex’sequity and hold a 94 percent voting stake.

“Given WorldCom’s increasing emphasis on the fast growingInternet business, I think this proposed acquisition makes sensefrom a strategic standpoint,” said David Burks, an analyst withJ.J.B. Hilliard W.L. Lyons in Louisville, Ky.

Beltsville, Md.-based Digex hosts Web sites and other Web-basedapplications for more than 550 customers, including large retailerslike J. Crew, automotive manufacturer Nissan and others. Itoperates two data centers in the United States and one in theUnited Kingdom.