New horizons

New York/Philadelphia, Jan. 31 (Reuters): SBC Communications Inc said on Monday it will buy AT&T Corp for about $16 billion, aiming to bolster its services for large corporations and end ?Ma Bell?s? independence.

The combined company would have around $71 billion in revenues, the same as top US telecom Verizon Communications Inc. A merger would likely face antitrust hurdles.

SBC?s acquisition of the No. 1 long-distance carrier will include $14.7 billion in SBC stock and a special dividend of roughly $1.04 billion to be paid by AT&T to its shareholders when the deal closes.

SBC will issue 0.78 of its shares for each AT&T share, valuing AT&T at $18.41 a share. AT&T will then pay a special dividend of $1.30 a share. Combined, the deal would value AT&T at $19.71 a share ? no premium to its closing stock price on Friday.

The deal, which is expected to close by the first half of 2006, has already drawn criticism from analysts, who slammed $16 billion as too expensive for a company that has shrinking revenues and questionable growth prospects.

?AT&T?s business doesn?t seem that accretive or value added,? said Greg Gorbatenko, an analyst with Marquis Investment Research.

AT&T shares closed on Friday at $19.71, up 11 cents. SBC closed down 0.2 per cent at $23.62, valuing the company at $78 billion.

Baby Bell returns

A combination of AT&T and SBC would reunite a ?Baby Bell? with its former parent ? a union former Federal Communications Commission chief Reed Hundt deemed ?unthinkable? in 1997.

For SBC chairman Ed Whitacre, a voracious purchaser of companies during his 15-year tenure at the helm of the Texas company, buying AT&T would complete a transformation of SBC from a regional, local telephone company into an international force.

?With this move, SBC would be elevated above the other Baby Bells with national business services,? Kagan said.

It is unclear what will happen to the AT&T name. ?We value the heritage and strength of the AT&T brand, which is one of the most widely recognised and respected names throughout the world, and it will certainly be a part of the new company?s future,? Whitacre said in a statement.

Whitacre will be chairman and chief executive officer of the combined company, while AT&T?s CEO David Dorman would serve as president. Dorman and two other AT&T executives would serve on the combined company?s board of directors, the companies said.