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Monday, March 22, 1999
Atlantic merger launches $3B Company with strong growth agenda
Attention Business Editors: Atlantic merger launches $3B Company with strong growth agenda; ``AtlanticCo'' creates 3rd largest incumbent telecom, 2nd largest IT group
ST. JOHN'S, HALIFAX, CHARLOTTETOWN, SAINT JOHN, March 22 /CNW/ - Bruncor Inc. (TSE, ME: BRR), Island Telecom Inc. (TSE, ME: IT), Maritime Telegraph and Telephone Company Limited (TSE, ME: MTT), and NewTel Enterprises Limited (TSE: NEL), owners of the major IT and provincial telecommunications companies in Atlantic Canada, announced today that they have reached a merger agreement.
With the working name of ``AtlanticCo'', the merged company, with a current market capitalization of approximately $3 billion, will be launched as a growth company with four core lines of business: telecommunications, information technology (IT), mobile satellite communications, and emerging business. The merged company would be one of the largest private sector employers in Atlantic Canada, with about 9,000 employees.
Stephen Wetmore, President & CEO of NewTel Enterprises, will be President & CEO of the new company, and Lino Celeste, Chairman of Bruncor, will be Chairman of the Board of Directors.
Along with Mr. Wetmore, the senior management team includes: Colin Latham, Executive Vice-President, AtlanticCo, and President of the new company's telecommunications division, bringing together the four Atlantic Canada telecommunication companies -- NBTel, MT&T, Island Telecom, and NewTel Communications; Gerry Pond, Executive Vice-President, and President, Information Technology and Emerging Business, responsible for IT, mobile satellite communications, and emerging business; Bob Benson, Executive Vice-President and Chief Financial Officer; and Bill Steeves, Vice-President, Corporate Services, heading up the senior transition team.
With total revenues of $1.7 billion in 1998, AtlanticCo's combined resources create the third largest Canadian-owned incumbent telecommunications company, and one of the largest mobile satellite services companies in North America.
``In addition, our combined IT group, with more than 1,800 professionals, will make us the second largest Canadian-owned information technology services operations,'' Mr. Wetmore said. ``Our range of investments in emerging businesses and advanced telecommunications, such as ImagicTV and the products generated from NBTel's LivingLABtm innovations environment, position AtlanticCo for growth in world export markets.''
It is anticipated that shareholder meetings to approve the merger will be held by May 19, with closing set or May 31, 1999. Shares of the four current public companies will be exchanged for shares in the new company. BCE Inc. would own about 42 percent of the new company.
An Agenda For Growth
``The reason for this merger is simple: to create an aggressive growth company,'' said Mr. Wetmore. ``By pooling our assets and resources, AtlanticCo will be greater than the sum of its parts. This merger builds upon our long history of co-operation, and represents a natural evolution for our companies to secure our future growth.''
That growth, said Mr. Wetmore, will be achieved by focusing on two key strategies. ``We are going to grow by protecting and enhancing the telecom business in our home markets. This transaction, supported by our strong relationship with Bell Canada and its affiliated companies, will secure our response to increasing national and international competition.''
In addition, the new company has established working agreements with Bell Nexxia, a new company within the Bell Canada Group responsible for national delivery of Internet Protocol products and services. ``This will help us to deliver global reach and leading edge products and services for our customers - both critically important for a company of our size. As well, Bell Nexxia will benefit from the significant research and development work and the sophisticated networks in place in Atlantic Canada.''
``Secondly, we will expand our businesses and revenues outside our borders. We're going to create tremendous opportunities for revenue and customer growth, market reach, and satisfying careers for our people.'' AtlanticCo's expanded information technology group now includes xwave solutions, MITI Information Technology Inc., NBTel's IT practice, and Island Tel Advanced Solutions. ``We will grow our IT business by focusing on the total technology needs of clients in telecom, oil and gas, and selected public sectors worldwide.''
The mobile satellite communications business will be driven through AtlanticCo's majority ownership in Stratos Global Corporation (TSE:SGB). Through this investment AtlanticCo will be a major player in satellite communications worldwide. ``The wider capital pool available from this merger will help finance Stratos' growth strategy, and Stratos will also pursue joint opportunities with BCE's mobile satellite business.'' ``The Emerging Business portfolio will be focused on developing and nurturing new technology-based products and services in support of telecom-intensive industries. These innovations will be integrated and delivered through our other lines of business and through export opportunities around the globe.''
``The combination of these skills and resources creates a very dynamic company that will deliver increased shareholder value. We are confident, that, through our activities, we will make a positive contribution to the economy of Atlantic Canada and to our provincial operating regions.''
Telecommunications
AtlanticCo's telecommunications division brings together the major Atlantic provincial wireline and wireless telecommunications companies with a common operating platform to create the third largest Canadian-owned incumbent telecommunications company, under the leadership of Colin Latham. As President of MT&T and Chairman of the Stentor Council of CEO's, Mr. Latham is a recognized leader in the telecommunications industry.
``Our companies have been cooperating on a number of strategic initiatives over the years through the Atlantic Provinces Telecommunications Council. We have jointly developed and implemented a common world-class billing system, as well as payroll and finance and administrative systems representing investments of more than $100 million. We will focus on gaining efficiencies, especially in our operational and capital programs, and re-invest in new areas of telecom growth, such as wireless, high speed Internet access, and sophisticated e-commerce applications,'' Mr. Latham said. The provincial telecom units will continue as separate entities with their strong brand identities and they will maintain their consistent focus on superior customer services delivered by their employees in their own communities. The senior telecom management will include Mr. Latham, President of MT&T; Fred Morash, President of Island Telecom; Frank Fagan, President of NewTel Communications; and Gerry Pond, President of NBTel.
``This senior telecom team will be committed to delivering superior customer service, at competitive rates, and utilizing the resources and skills of our people. We will retain strong local presence, as the provincial telecom units will continue with their own brand identities, and their own customer service operations. All four provinces will still be served by their local company after the merger is completed.''
Information Technology and Emerging Business
As President and CEO of Bruncor, Gerry Pond has developed the corporation into a world leader in customer service, innovation, and research and development. Nearly one-third of Bruncor's revenues in 1998 were generated by the sale of the Company's intellectual property and consulting skills.
``I'm looking forward to growing this exciting company. There are tremendous opportunities available to us, and we are now poised to take full advantage for the benefit of our future growth.'' ``The alignment of our information technology resources creates an organization with tremendous strengths in IT consulting, IT outsourcing, systems integration, enterprise management, value-added resale and high demand specialty practice areas, and network services. We will be adding to our 1,800 employees in our centres of expertise across the country and internationally.'' AtlanticCo IT business units are located in St. John's, Charlottetown, Halifax, Saint John, Fredericton, Moncton, Toronto, Ottawa, Calgary, Edmonton, and Dallas.
Stratos Global, with offices in St. John's, Toronto, Bethesda, London and Hong Kong, delivers multiple communications services to commercial companies worldwide in maritime, oil and gas, mining, and aeronautical sectors. ``Stratos Global successfully manages a number of key communications requirements for the U.S. Navy from its base in Atlantic Canada. This is the kind of growth strategy that AtlanticCo will continue to concentrate on.''
``It has certainly been our experience that the people and companies of Atlantic Canada are leaders in new technology development and applications. In New Brunswick we've seen the LivingLAB(TM) innovations environment produce a variety of new services, which are being utilized worldwide.
``Our export and advanced services businesses will have access to an increased capital pool and we will be focused on continuing the aggressive development of products and services for telecom-intensive industries such as computer telephony integration, TV over copper, high-speed residential and business e-commerce solutions and others,'' Mr. Pond said.
Change in Industry
The combined company will gain significant efficiencies as a result of the merger, resulting in annualized savings projected at $80 million in operating expenses and $50 million in capital expenditures. ``For example, right now we have four companies each purchasing licenses to use computer software for administrative systems; that will now be reduced to one system. Similarly, we will undertake the joint purchase of network equipment, thereby reducing expenditures'', said Mr. Wetmore.
Mr. Wetmore emphasized that AtlanticCo, in line with the general restructuring which has been taking place in the industry, will see a rebalancing of employment from some segments of our operation to the growth areas of the business. ``In NewTel's case, for example, while our employee base in the telecom business declined by 800 positions during the 1990s, NewTel's total employment actually rose from 2,200 to 3,000 employees and professionals. ``Furthermore, in undertaking this rebalancing, only 45 positions were impacted by layoffs. That's the track record, and the values, which AtlanticCo will bring to our restructuring program.''
``Over the past year, our four companies have increased our workforce by 1,000 employees. With our emphasis on growth and investment, we are going to continue to create jobs. We expect total employment for AtlanticCo to grow, and, given the potential of our industry, this will have a positive impact on telecom-related and IT sectors in Atlantic Canada.''
Bruncor Inc. (TSE, ME: BRR) is a communications-focused, management holding company with investments in companies providing local and long-distance telephone services, wireless, Internet, advanced network, multimedia and information technology services. Its operations include: NBTel, NBTel Mobility, MITI Information Technology Inc. (MITI), ImagicTV Inc., New North Media, NBTel Global Inc., and Connectivity Managed Network Services Ltd.
Island Telecom Inc. is a Prince Edward Island company which uses its world-class digital telecommunications network and a team of more than 300 dedicated employees to deliver advanced technology, products and services to the residents of Canada's smallest province. Island Telecom's operating subsidiary is Island Tel Advanced Solutions Inc. (ITAS).
Maritime Telegraph and Telephone Company Limited is Nova Scotia's largest telecommunications provider. It brings its customers the power of information age through innovative telecommunications consulting and technology solutions and services, including wireline and wireless voice, data and Internet access. MT&T's holdings include Maritime Tel & Tel Limited, MT&T Mobility Inc., MT&T Leasing Inc. and MT&T Holdings Inc.
NewTel Enterprises Limited (TSE: NEL) of Newfoundland is a group of technology companies, with 3,000 professionals serving customers in worldwide markets in telecommunications, information technology and mobile satellite services. The NewTel Group includes NewTel Communications, NewTel Mobility, xwave solutions, Stratos Global Corporation, AMI Offshore, and NewTech Instruments.
More information on the four companies may be found on their websites: www.newtel.com www.bruncor.com www.islandtel.pe.ca www.mtt.ca
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Merger of Maritime Telegraph and Telephone Company, Limited, Bruncor Inc., NewTel Enterprises Limited and Island Telecom Inc.
Summary of Combined Company (1)
(millions, except per share amounts)
Income Statement Items
Total Revenues $1,719.0
EBITDA 746.9
Net Income 172.2
Average AtlanticCo Shares 125.4
Year-End AtlanticCo Shares 126.2
Earnings Per AtlanticCo Share $1.37
Dividend Per AtlanticCo Share $0.90
Dividend Payout Ratio 65.7%
Balance Sheet Items
Property, Plant and Equipment $2,060.1
Total Assets 2,699.8
Long-Term Debt 990.1
Common Shareholders' Equity 1,033.5
Book Value Per AtlanticCo Share $8.19
Credit Statistics
Net Debt/Total Capitalization (at market) 31.3%
Net Debt/Total Capitalization (at book) 54.9%
Net Debt/EBITDA 1.7x
EBITDA/Interest 6.8x
Cash Flow Statement Items
Cash Flow From Operations $485.2
Cash Flow Per AtlanticCo Share $3.87
Capital Expenditures 322.0
Common Dividends Paid 95.2
(thousands, except employees)
Operations
Total Employees 8,610
Network Access Services 1,620
Long Distance Minutes 2,152,200
Mobility Subscribers 230.6
Internet Subscribers 126.9
Long Distance Market Share 86%
Mobility Market Share 78%
Internet Market Share 71%
Note:
-----
1. All figures are in Canadian dollars and are as at and for the year
ended December 31, 1998.
Merger of
Maritime Telegraph and Telephone Company, Limited, Bruncor Inc.,
NewTel Enterprises Limited and Island Telecom Inc.
Transaction Summary
Interim Company Name - 3595641 Canada Inc. (``AtlanticCo'')
Transaction Structure - Amalgamations (Bruncor, NewTel, Island Tel)
- Plan of Arrangement (MT&T)
Exchange Ratio - 1.667 AtlanticCo common shares per MT&T common
share
- 1.011 AtlanticCo common shares per Bruncor
common share
- 1.567 AtlanticCo common shares per NewTel
common share
- 1.000 AtlanticCo common shares per Island Tel
common share
- 0.605 AtlanticCo common shares per MT&T
preferred share
Share Structure - Common voting (1 share = 1 vote)
Accounting Treatment - Pooling of interests
Tax Treatment - Tax free rollover for shareholders
Proposed Dividend
Policy - $0.90 per AtlanticCo common share
Designated Chairman - Lino J. Celeste
Designated President
& CEO - Stephen G. Wetmore
Designated CFO - Robert H. Benson
Designated Executive
Team - Gerald L. Pond, Executive Vice President and
President Information Technology and Emerging
Business
- Colin Latham, Executive Vice President and
President Telecommunications
- William H. Steeves, Vice President Corporate
Services
BCE Inc. Ownership - Approximately 41.6%
Board of Directors - 13 members, comprised of 3 each from MT&T,
Bruncor and NewTel; 1 from Island Tel; 2 from
BCE Inc.; and the President and CEO of
AtlanticCo
Strategic Alliance
Agreement - BCE Inc. and Bell Canada
Approvals Required - MT&T - 50% by number, and
- 75% by value of votes cast
- Bruncor - 66 2/3% of votes cast
- NewTel - 66 2/3% of votes cast
- Island Tel - 75% of votes cast
Cost Savings Estimates - $80 million annually in cash operating costs by
the end of year 2
- $50 million annually in capital by the end of
year 2
Expected Transaction Timing
Mailing of Information
Circular - Mid April 1999
Shareholders Meetings - May 18 and 19, 1999
Closing - May 31, 1999
MEDIA ALERT
Saint John, Charlottetown, Halifax, St. John's, March 22 /CNW/ - Gerry Pond, President and CEO, Bruncor, Fred Morash, President and CEO, Island Telecom, Colin Latham, President and CEO, MT&T and Stephen Wetmore, President and CEO, NewTel Enterprises, will be available to answer media questions about ``AtlanticCo'' via telephone conference call today, Monday March 22 at 3:00 p.m. AST, 3:30 NST.
Members of the media should dial in to 1-800-403-6444. Audio tape of the conference call will be available starting one hour after the call concludes by dialing 1-800-558-5253 and entering the pass code, 2022148#. The tape will be available for one week.
For further information: Harry Connors (709) 739-2837
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