SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
8 November 2004
BT Group plc
(Translation of registrant's name into English)
BT Centre
81 Newgate Street
London
EC1A 7AJ
England
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F..X... Form 40-F.....
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes ..... No ..X..
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- ________
Enclosure: 1. Acquisition of Infonet announcement made on 8 November 2004
November 8, 2004
BT TO ACQUIRE INFONET TO STRENGTHEN GLOBAL POSITION
-BT to acquire Infonet for $965m (GBP520m). Net of Infonet's net cash
balance, the aggregate value of the acquisition is $575m (GBP310m)
-Acquisition boosts BT's position as a global leader for IT and networking
services
-BT to benefit from extended global reach, wider customer base and
specialist skills
-BT's position enhanced in key markets including North America and Asia
Pacific
-Cash synergies of $150m (GBP80m) in third year following the acquisition
BT announced today it has signed a definitive agreement to acquire Infonet, one
of the world's leading providers of international managed voice and data network
services. The transaction values Infonet at $965m (GBP520m). Excluding Infonet's
net cash balance of $390m (GBP210m), the aggregate value of the deal is $575m
(GBP310m). The deal is subject to Infonet shareholder approval and regulatory
clearances and is expected to complete in the first half of 2005. Shareholders
representing 97 per cent of Infonet's voting share capital have committed to
support the transaction.
The acquisition of Infonet marks a significant step forward in BT's strategy of
addressing the IT and networking services needs of multi-site companies and
organisations. It will greatly extend BT's global reach and will deepen the
company's presence in North America and Asia Pacific. Infonet's recognised
strengths in innovation, product quality and customer service will complement
BT's strengths in the managed network services market.
Infonet's $620m of revenue, from the provision of cross-border services to 1,800
multinational corporate customers, significantly increases that element of BT
Global Services' business.
Commenting on the deal, BT chief executive Ben Verwaayen said: "This is another
milestone in BT's transformation into a leading global provider of IT and
networking services. It is our goal to be the first choice for multi-site
organisations around the world as they address their increasingly complex
communications needs."
BT Global Services CEO Andy Green added: "Infonet brings us specialist skills, a
great customer base, increased global reach and additional local presence where
we need it. By combining the strengths of both companies, we will substantially
improve our ability to help our new and existing customers address the
challenges and opportunities of the digital networked economy."
Jose A. Collazo, Infonet chief executive, commented: "This transaction is great
news for Infonet's customers, employees and partners. Our combination with BT
will improve our ability to supply mission-critical services to our customers,
by bringing a commitment to the long term development of IP-based services
backed by financial strength and true global scale. While continuing to take
full advantage of our existing services and delivery platform, our customers
will also be able to access the whole breadth of BT's product and solutions
capabilities. The company, its management and its employees are excited by the
opportunities that the combination brings, and we look forward to joining the BT
family."
BT expects to realise significant cost savings from combining the two
businesses. Overlapping global network elements will be eliminated and
efficiencies will be achieved, in part through the rationalisation of country
operations, back-office and administrative functions. Already identified actions
are expected to reduce the annual cash costs of the combined businesses by $150m
(GBP80m) in the third year following the acquisition. Infonet's net tax asset of
GBP100m will add further value.
The transaction is expected to be cashflow neutral for BT in the first year
following acquisition and positive thereafter. In the first year it will be
dilutive to BT's net earnings by around 0.5 pence per share; thereafter it will
be accretive.
Infonet has local operations in 70 countries. Together with network access in
about another 180 countries, points of presence in about 3,000 cities and strong
sales and support partnerships around the world, Infonet greatly enhances the
reach provided by BT to its corporate customers. As well as a substantial
European business, Infonet brings a significantly improved market presence in
the Americas, a key market for global IP-based services, with $182m of sales. It
also strengthens BT's existing operations in the rapidly expanding economies of
Asia Pacific.
Infonet's recognised market-leading product quality, performance levels and
customer service will complement BT's already strong capabilities. In
particular, Infonet has recognised strengths in value-added services, such as
mobile data, network security and multimedia products
Infonet customers will benefit from BT's scale, financial strength and focus on
global IT and networking services. BT will enhance Infonet's offering to include
broader solutions and services, outsourcing and systems integration, as well as
BT's domestic managed network service portfolio in major markets around the
world.
The integration of Infonet and BT Global Services will be phased to ensure
service quality is maintained during a seamless evolution for customers. Whilst
the transport networks of the two businesses will be combined rapidly, BT will
continue to run the two product sets separately for a period, allowing the best
of each to be incorporated as the service offering is combined. Infonet's
experienced management team, led by its chief executive, Jose A. Collazo, will
remain in place to manage the business, maintain continuity for customers and
assist in the integration of the two customer bases and product sets.
Simultaneous with the acquisition of Infonet, BT will enter into a strategic
relationship with KDDI (a major distributor of Infonet services) to address
network-centric outsourcing opportunities for BT customers in Japan, and also
for KDDI customers outside Japan.
BT is being advised in relation to the transaction by Rothschild and Allen and
Overy LLP.
A conference call with analysts and investors will be held today at 1000 UK
time. Interested parties should dial in on +44 20 8974 7950 (pin code 946404#).
A replay of the call will be available on +44 1296 618 700 (pin number 568831).
Inquiries about this news release should be made to the BT Group Newsroom on its
24-hour number: 020 7356 5369. From outside the UK dial + 44 20 7356 5369. All
news releases can be accessed at our web site: http://www.bt.com/newscentre
Rationale for the Transaction
BT is at the heart of the digital networked economy and aims to be the first
choice for multi-site organisations around the world as they address their
increasingly complex IT and networking services needs. By combining its
capabilities with Infonet, BT substantially improves its ability to help
large corporations address the whole spectrum of challenges and
opportunities of the digital networked economy across all geographies.
The acquisition of Infonet is a very significant step forward, bringing BT
1,800 multinational customers with complex cross-border communications
requirements. Infonet today services customers in six continents with
award-winning products and highly regarded networking skills.
A key strength of Infonet is its global reach. With local operations in
close to 70 countries, its worldwide presence allows customers to rely on it
for a seamless and effective service, wherever their sites are based.
Infonet has a strong market presence in the Americas, a strategic market in
which BT has steadily been building its presence. Infonet's $182m of revenue
in this region grew last year by more than 30 per cent reflecting a strong
relationship with such customers as DHL and Nestle.
Infonet also brings to BT new scale in other regions identified as important
for international companies - particularly the key European economies and
Asia Pacific. Its customers in these markets include Siemens, Nokia, Bayer
AG International, IBM and Hilton International.
Infonet has a history of 35 years in the international data communications
industry. It has established highly regarded product sets and service
levels. It has also recently earned its 10th consecutive overall "Best in
Class" distinction from Telemark, outperforming Telemark's benchmark for
each of the ten most important service provider attributes. BT's existing
customers will benefit from Infonet's cutting edge fault management, order
management, pricing and billing systems and tools.
BT expects to see significant benefits from the combination of the product
sets and customer bases of the two companies. BT's financial strength and
its commitment to the development of IP-based solutions will enhance
Infonet's offering to its corporate customers. Infonet customers will for
the first time be able to acquire in-country, as well as international,
managed network services from a single truly global source. In addition, BT
expects to offer its portfolio of IT services, outsourcing solutions and its
voice communications products to the Infonet customer base.
Recognising the quality of both product sets and their importance to both
sets of customers, BT intends to operate both platforms in parallel for some
time. The integration and harmonisation of these will be managed so as to
continue the best of both for the combined business and its customers.
Notwithstanding this, BT intends to combine the two companies' transport
networks rapidly and to rationalise their local assets where possible,
without inconvenience to customers.
Infonet customers will be in a position to benefit from BT's scale,
financial strength and focus on global IT and networking services. BT will
enhance Infonet's offering to include broader solutions and services,
outsourcing and systems integration, as well as BT's domestic managed
network service portfolio in major markets around the world.
The management team and employees of Infonet, led by President and Chief
Executive, Jose A. Collazo, will join BT and will share the responsibility
for ensuring a successful integration and rationalisation process. The
combination is expected to create exciting opportunities for the employees
of both organisations.
Financial Profile
Infonet has reported average annual growth in core revenues of 11 per cent
over the past two years to $620m in 2003/04. It has indicated that it
expects to be cashflow positive by the end of the current financial year.
BT expects the transaction to be cashflow-neutral in the first year and
positive thereafter, after financing costs but before restructuring costs.
It will be dilutive to net earnings by around 0.5 pence per share in the
first year but will increase BT's earnings per share thereafter.
BT expects to realise significant cost savings through the combination of
both companies. Already identified savings include the elimination of
overlapping network leasing, operating and maintenance costs, the reduction
of Infonet's in-country access costs through BT's scale and purchasing
power, and the generation of efficiencies in sales costs, administrative
functions and back-office operations. These savings are expected to reduce
the annual cash costs of the combined businesses by $150m (GBP80m) in the
third year following the acquisition. Infonet's net tax asset of GBP100m
will add further value.
Transaction Structure
Upon completion of the transaction, BT will pay consideration to the
stockholders of Infonet on the following basis:
For each outstanding Infonet A Share or B Share$2.06 in cash.
This values the entire outstanding share capital of Infonet at $965m
(GBP520m). Net of Infonet's net cash balance as at 31 March 2004 of $390m
(GBP210m), the aggregate value of the acquisition is $575m (GBP310m).
The offered price represents a premium of 23 per cent to the average price
per Infonet share over the past three months of $1.68.
The Transaction is subject to the approval of Infonet's shareholders. The
Board of Directors of Infonet and Infonet's Special Committee representing
the interests of Class B shareholders have unanimously approved the
transaction. Infonet's six Class A shareholders, who together hold 97% of
the voting rights of the company, have signed irrevocable undertakings to
vote in favour of the transaction. Each of the Executive Officers of Infonet
has irrevocably undertaken to vote in favour of the transaction.
Infonet's shareholders will receive a proxy statement containing full
details of the transaction in the coming weeks.
The completion of the transaction, which is conditional upon regulatory
approvals, is expected in the first half of 2005.
Notes to Editors
About BT
BT Group plc is the holding company for an integrated group of
communications businesses and is listed on stock exchanges in London and New
York. BT Telecommunications plc (BT) is a wholly-owned subsidiary of BT
Group and encompasses virtually all businesses and assets of the BT Group.
BT is one of the world's leading providers of communications solutions
serving customers in Europe, the Americas and Asia Pacific. Its principal
activities include network centric Information and Communications Technology
(ICT) solutions, local, national and international telecommunications
services, and higher-value broadband and internet products and services.
BT consists principally of three lines of business:
- BT Retail, providing fixed and mobile communications services and
solutions to over 20 million business and residential customers in the UK.
It is also a leading UK internet services provider.
- BT Wholesale, providing network services and solutions within the UK to
more than 600 fixed and mobile operators and service providers including the
provision of broadband, private circuits and PSTN.
- BT Global Services, providing ICT services internationally to meet the
needs of multi-site organisations with European operations. BT Global
Services operates in 136 countries and also offers international carrier
services.
In the year ended 31 March 2004, BT Group's turnover was GBP18,519 million
with profit before goodwill amortisation, exceptional items and taxation of
GBP2,013 million.
For more information, visit www.btplc.com
About Infonet
Infonet Services Corporation, known for its quality of service, is a
leading provider of managed network communications services for thousands of
multinational corporate entities.
Employing a unique consultative approach, Infonet offers integrated
solutions optimizing the complex relationship between enterprise
applications and the global network. Extensive project management
capabilities are the foundation for the services and solution offerings
(broadband, Internet, intranet, multimedia, videoconferencing, wireless/
remote access, local provisioning, application and consulting services)
positioning Infonet as a single-source partner for its customers. In
particular, Infonet IP VPN solutions offer multinationals a unique
combination of private and public internet protocol services as well as a
full set of managed security and mobility services.
Rated "Best in Class" overall in Telemark's annual survey of Global Managed
Data Network Services, Infonet has also won "Best Customer Care" and "Best
Carrier" at the World Communication Awards. Founded in 1970, Infonet owns
and operates The World Network, accessible from more than 180 countries, and
provides local service support in over 70 countries and territories.
Infonet reported revenue in 2003/04 of $620m. Infonet expects to be
cashflow positive by the end of the current financial year.
Infonet's stock is traded on the New York Stock Exchange under the symbol
IN. Additional information about the company is available at
www.infonet.com.
Forward Looking Statements
Statements about the expected effects on BT of the acquisition of Infonet,
statements about the expected timing, certainty and scope of the acquisition
and all other statements in this release other than historical facts are
forward-looking statements. Forward-looking statements include information
about possible or assumed future financial results and usually contain words
such as "believes," "intends," "expects," "anticipates," "estimates", or
similar expressions. These statements are subject to risks and uncertainties
that may change at any time, and, therefore, actual results may differ
materially from expected results due to a variety of factors, including, but
not limited to, the satisfaction of the conditions to closing of the
acquisition. We caution investors not to place undue reliance on the
forward-looking statements contained in this press release. These statements
speak only as of the date of this press release, and we undertake no
obligation to update or revise the statements, risks or reasons. All
forward-looking statements are expressly qualified in their entirety by this
cautionary statement.
In connection with the merger, Infonet will be filing a proxy statement with
the US Securities and Exchange Commission. Investors and security holders
are urged to read the proxy statement concerning the proposed transaction
when it becomes available because it will contain important information.
Investors and security holders may obtain a free copy of the proxy statement
when it becomes available and other documents filed or furnished by Infonet
with the SEC at the SEC's website at www.sec.gov. The proxy statement and
other documents filed or furnished by Infonet may also be obtained for free
by directing a request to Infonet at +1 310-335-2600.
Investors may obtain a detailed list of names, affiliations and interests of
participants in the solicitation of proxies of Infonet stockholders to
approve the merger at the following address: Infonet, 2160 East Grand
Avenue, El Segundo, CA 90245 USA
N M Rothschild & Sons Limited and Rothschild Inc.
"Rothschild" refers collectively to N M Rothschild & Sons Limited and Rothschild
Inc.
N M Rothschild & Sons Limited, which is authorised and regulated by the
Financial Services Authority in the United Kingdom, is acting for BT and no one
else in relation to the transaction and will not be responsible to anyone other
than BT for providing the protections afforded to clients of N M Rothschild &
Sons Limited nor for providing advice in relation to the proposed transaction.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BT Group PLC
(Registrant)
By: /s/ Patricia Day
--------------------
Patricia Day, Assistant Secretary. Head of Shareholder Services
Date 8 November, 2004