---
title: "WorldCom → MCI Communications"
url: "https://mahouse.world/ma-deals/worldcom-buy-mci-communications-1997"
type: "M&A deal"
year: "1997"
---

# WorldCom → MCI Communications

A $37bn all-share merger in which WorldCom, a Mississippi long-distance company built by acquisition, outbid British Telecom and GTE for MCI; it was the largest corporate merger in US history when agreed, and the combined company collapsed in accounting fraud four years later.

Won against competing bids from BT and GTE; the combined company collapsed into accounting fraud four years later.

- **Acquirer:** WorldCom (United States)
- **Target:** MCI Communications (United States)
- **Value:** $37B
- **Announced:** October 1997
- **Completed:** September 1998
- **Sector:** Telecom
- **Deal type:** acquisition

## Why it mattered

MCI had led the challenge that broke up the Bell System and ran part of the internet's backbone. British Telecom, already a 20% shareholder, had agreed in November 1996 to buy the rest, and in October 1997 GTE offered $28bn in cash. WorldCom topped both with $51 a share in its own stock, and on 10 November 1997 MCI accepted. BT, whose own agreement was terminated, received $51 a share in cash for its stake, about $7bn, plus $450m from WorldCom for giving up its deal, and bought MCI's 24.9% stake in Concert Communications. WorldCom forecast cost savings of $2.5bn in 1999 rising to $5.6bn by 2002, plus $2bn a year less capital spending, and put MCI's shareholders at about 45% of the combined company.

The regulatory price was MCI's internet business: to win the Justice Department's approval, MCI sold it to Cable & Wireless for $1.75bn. The merger closed on 14 September 1998, and the company was named MCI WorldCom.

## What it left behind

WorldCom tried to repeat the trick at once: in October 1999 it agreed a $129bn merger with Sprint, abandoned in July 2000 after the Justice Department and European regulators raised monopoly concerns. From mid-1999 senior executives had been using fraudulent accounting to disguise declining earnings and support the share price, and by 2003 its assets were estimated to have been inflated by about $11bn, then the largest accounting fraud uncovered. WorldCom filed for bankruptcy in July 2002, the largest US filing to that date, took the MCI name in 2003 and was bought by Verizon in January 2006; its operations were folded into Verizon Business. Bernard Ebbers, the chief executive who made the deal, was sentenced in 2005 to 25 years in prison. A company that grows by buying with its own shares needs those shares to keep rising; when the acquisitions stop, the pressure to show growth moves onto the accounts, and the acquirer's currency deserves as much diligence as the target.

Source: https://en.wikipedia.org/wiki/WorldCom