NEW YORK-World Access Inc., Atlanta, plans to “divest, spin off or otherwise monetize” its telecommunications network equipment business units, in accordance with a board of directors’ vote made public Dec. 9.
The company’s equipment group designs, manufactures and sells intelligent multiplexers, digital microwave radio systems and switches, billing and network management systems, cellular base stations, wireless local loop systems and other network infrastructure products.
World Access retained Donaldson, Lufkin & Jenrette Securities Corp. and Brown Brothers Harriman & Co. as financial advisers “in the sale or other disposition of these units … either individually or collectively.”
Shareholders of World Access Inc., Atlanta, voted Dec. 7 to approve its acquisition of FaciliCom International Inc., Washington, D.C., by paying FaciliCom stockholders about $436 million and assuming about $300 million in FaciliCom debt.
FaciliCom provides end-to-end communications services through a redundant digital network capable of supporting voice and data services, including frame relay, Internet Protocol, asynchronous transfer mode and multimedia applications. Its network supports a variety of American National Standards Institute and International Telecommunication Union signaling interfaces, including Signaling System 7 and C7.
“With the completion of our merger earlier this week with FaciliCom, we now have an international long-distance business that has in excess of $1 billion in annual revenues, generates significant [earnings before taxes, depreciation and amortization] and is extremely well positioned to pursue aggressively growth opportunities in the [United States], Europe and other deregulating markets throughout the world,” John D. Phillips, chairman and chief executive officer of World Access, said.
The $1 billion in revenues includes those of World Access’ Telecommunications Group, which terminates international long-distance voice and data traffic in at least 200 countries. Its equipment group generates more than $250 million in annual sales and comprises several highly profitable businesses, the company said.
“While we believe there are evident synergies between our ILD business and our equipment group, it has become clear this year that the financial markets are not willing to recognize the inherent value of these two businesses within one company,” Phillips said.
“Our motivation in recommending this divestiture plan to our board was driven solely by our belief that the financial markets would continue to undervalue the combined businesses in the future, and new Wall Street sponsorship and related coverage would be difficult to obtain due to the complexity of our existing structure.”
With sufficient cash on hand to finance its international long distance plans for at least 18 months to two years, World Access will “work patiently” on evaluating all possible alternatives, the chief executive said. Options on the table include “sales to strategic acquirers and sales of majority shares through one or more initial public offerings,” he added.
As part of the FaciliCom acquisition, World Access issued $300 million in 13.25 percent senior notes due 2008, exchanging them for FaciliCom’s outstanding $300 million in 10.5 percent notes, which also matured in 2008.
The company, which is publicly traded on Nasdaq, also raised $75 million in private equity it used to fund the cash portion of its merger, the company said Dec. 7.
