Word that WorldCom is still committed to the deal bumps the Tampa company's shares up more than 45 percent.
Investors bid up Intermedia Communications' depressed stock price Friday after WorldCom reaffirmed its plans to acquire the Tampa telecommunications company.
The merger had been in doubt since Dec. 13, when a Delaware judge said Intermedia and WorldCom might have to pay damages to shareholders of an Intermedia subsidiary if they proceeded with the deal.
Amid the uncertainty, Intermedia's stock price fell from $10.94 on Dec. 13 to $4 on Dec. 22. But Friday, Intermedia's stock shot up again. It closed the day at $7.19, up $2.25, or 45.6 percent.
Shareholders of Intermedia-controlled Digex Inc., a Beltsville, Md., company that hosts Web sites for Fortune 2000 companies, filed suit shortly after the acquisition was announced in September. They claimed Intermedia and Digex directors breached their fiduciary duties by agreeing to the deal because Digex would have netted far more if it were sold separately.
Despite the judge's ruling, Intermedia shareholders voted to proceed with the merger a week later. But it was not immediately clear what WorldCom intended to do, and the company had refused all comment.
The reason for Friday's stock jump: WorldCom stated in a document filed with the Securities and Exchange Commission that "we expect the merger to be completed in the first quarter of 2001."
The company noted in the filing that it could be liable for monetary damages, and that its operating costs might increase as a consequence. But the company concluded that the probable outcome of the Digex lawsuit and other legal matters facing the company "should not have an adverse effect on the WorldCom group's combined results of operations or financial position."
The report clearly came as a relief to Intermedia. The company is running low on cash and concerns were mounting as to what would happen if the deal fell through.
"We never said that there was any indication that the merger was in jeopardy," said Intermedia spokesman Alan Hill. But he added that he was pleased that WorldCom had repeated its intention to forge ahead.
"The Justice Department has approved the deal. Half of the states have approved it. The Delaware judge refused to block it. And Intermedia shareholders approved it," Hill said. "Now all we're waiting for is the (Federal Communications Commission) and the rest of the states."