Globe, Islacom bare $2.3-B merger deal

Globe Telecom Inc. announced yesterday that it had merged with mobile telephone company Isla Communications Inc. (Islacom) in an all-stock transaction worth $2.3 billion.

The transaction, which was already approved by the board of directors of both firms, is expected to close between October and December this year even as it is still subject to certain conditions, including various regulatory, shareholder and certain third party approvals.

Globe intends to seek approval from its shareholders at a stockholders' meeting in April.

The combined company will have over 1.2 million and 320,000 mobile phone and fixed line subscribers, respectively and is expected to be the biggest competitor of sister firms Smart Communications Inc. and Pilipino Telephone Corp. (Piltel) which are under telecom giant Philippine Long Distance Telephone Co. (PLDT).

With the move, Globe and Islacom will combine in an all-stock transaction involving an exchange of new Globe common and preferred shares to Islacom's shareholders.

The transaction values the equity of both companies at $2.3 billion.

Under the arrangement, Globe will execute a one for 50 reverse stock split and a declassification of its common shares, after which it intends to issue 28.8 million new common shares to Islacom's shareholders.

Globe will also issue 158.5 million new voting convertible preferred shares to a holding company that will be owned 60 percent by Ayala Corp.; Singapore Telecom International, 20 percent; and Deutsche Telekom (through DT Asia), 20 percent.

Incidentally, Ayala Corp. and STI control Globe while DT is the strategic partner of Ayala Corp. in Islacom.

Globe also intends to provide its other shareholders the opportunity to purchase an additional 31.5 million new preferred shares.

As of Dec. 31, 1999 Globe had a total of 3.33 billion common shares outstanding. Assuming full conversion of its existing listed warrants Globe will have a total of 3.871 billion common shares outstanding in two share classes A and B.

The reverse stock split and declassification of common shares will result in a total of 77.4 million outstanding common shares and 190 million preferred shares outstanding.

The three major shareholders will each own approximately 27.8 percent of the common shares of Globe with other shareholders holding about 16.6 percent.

In the meantime, both Globe and Islacom will continue to operate separately but work will begin immediately to maximize operating synergies.

"The Globe and Islacom combination is an ideal strategic move that will create exceptional long term growth and value for shareholders, customers and employees. We will be able to quickly integrate the two complementary companies to achieve synergies, to broaden the range of services and to better meet the needs of its customers for high-quality and innovative services," said Axel Hass, DT Asia president.

By putting together the two cellular phone companies, the shareholders believe that the new entity will be uniquely positioned to speed the development of the digital wireless medium and the growth in postpaid and prepaid business.