Teleport to acquire ACC Corp. for 2.9 times revenue

Weekly Corporate Growth Report, Dec 8, 1997

The Deal: Teleport Communications has agreed to acquire long-distance carrier ACC Corp for stock valued at $1 billion, in a deal that pushes aside rival suitor Tel-Save Holdings. Teleport will pay $50 in its Class A common stock for each ACC share. If Teleport's average closing price falls below $45 or rises above $55 during the ten days prior to the acquisition, the exchange ratios will be adjusted. On the news, Teleport shares rose $1.25, or 2.5%, to close at $50.50/share, while ACC rose 75Q, or 1.7%, to close at $44.25/share.

Discussion: The Teleport offer matches Tel-Save's bid to acquire ACC, but after ACC's board agreed to recommend the Teleport deal to its shareholders, Tel-Save dropped its offer. The deal is the latest in a string of consolidations which have involved smaller telecommunications carriers seeking to take local and long-distance business away from the larger and more established carriers.

In September 1997, Teleport announced a major push into the long-distance business. The deal with ACC will give Teleport expertise in selling and marketing such services. It will also acquire a base of customers in the Northeastern US where Teleport has networks for originating and terminating domestic and international long dis tance traffic.

Analysts have predicted further consolidation in the industry. Many competitive local-exchange carriers (CLEC's) are considered ripe for acquisition by a large longdistance carrier, such as AT&T, that may be looking for a quick way into the Bells' territories.