MCI Will Acquire All of Digex

The acquirer is in Chapter 11, and the acquired company is not. But MCI has sealed the deal on its acquisition of managed hosting provider Digex, after its revised $1 a share offer coaxed several key holdouts into tendering their shares.

The merger ends the arms-length relationship the two companies sought to maintain after WorldCom acquired Digex parent Intermedia in early 2001, in which Digex remained an independent company although WorldCom owned the majority of Digex' shares. That allowed Digex to stay out of bankruptcy when WorldCom sought protection in July 2002. But the depth of the business ties between the companies left a cloud over Digex, which placed itself for sale late last year.

After no serious bidders emerged, MCI (the renamed WorldCom) offered 80 cents a share with the blessing of the bankruptcy court. It raised the offer on OCt. 24 to win over stakeholders David J. Greene & Company LLC and JMB Capital Partners, which held 7.1 million shares between them.

Companies hosted by Digex include McDonalds, Alcatel, Imation, Dole and Cummins