Bells are ringing at WorldCom (WCOM), formerly LDDS Communications, the nation's fourth-largest long-distance carrier, which is apparently buyout-bound. Takeover speculation started when billionaire John Kluge, WorldCom's chairman and largest stakeholder, announced on Aug. 14 he was selling his 16% stake. And Kluge's 30.8 million shares got snapped up quickly. The shares, held by Kluge through his Metromedia Co., went for 301/4. The stock closed at the same price on Aug. 22.
"The many deep-pocketed players eager to buy into fast-growing WorldCom, suggest buyout interest is strong," says one New York investment banker. Some pros whisper that one big buyer is Electronic Data Systems, which is being spun off by General Motors. "Expect EDS to announce it has acquired more than a 5% stake in WorldCom," he says. EDS may try to cover its stake for a while until it's ready to make an offer, he adds.
One big investor figures that WorldCom would be worth $47 to $50 a share in a takeover. "CEO Bernie Ebbers has done a tremendous job in sharply increasing the company's sales and earnings," he adds. EDS, a leading computer-service outfit, would be able to provide its customers combined computer and phone services if it had WorldCom's assets and operations, he explains. Other rumored potential suitors include Sprint, GTE, and the Baby Bells. "But cash-laden EDS has the best chances of convincing Ebbers about a deal," says this pro. Ebbers says "to my knowledge, none of the [rumored suitors] has bought shares." Like any public company, he adds, any offer would be subject to holders' approval. "But no approach has ever been made."