Metrocall makes bid for PageNet

Thursday, July 20th 2000, 12:00 am
By: News On 6

$1.57 billion offer for troubled firm includes $100 million cash infusion

Metrocall Inc., the third largest U.S. paging company, offered Wednesday to buy Addison-based Paging Network Inc. for $1.57 billion in cash and stock, 14 percent more than a rival bid from Arch Communications Group Inc.
The bid, which includes a $100 million cash infusion from Dallas investment firm Hicks Muse Tate & Furst, a Metrocall investor, comes less than one week after some PageNet debtholders filed an involuntary Chapter 11 bankruptcy petition against the company.

The filing was expected to open the door to more bids for debt-burdened PageNet, the world's largest paging company.

Besides the cash, Metrocall offered $727.5 million in stock and the assumption of $746 million of PageNet debt.

Arch announced its $1.36 billion stock-and-debt offer with PageNet in November.

Robert Lougee, a spokesman for Arch, the nation's second-largest paging service provider, said his company's deal is better, based on Arch's financial performance.

"We still feel strongly that the merger will get done, sometime in the fourth quarter," Mr. Lougee said.

A PageNet spokesman declined to comment.

PageNet has a comprehensive two-way paging network that's suitable for carrying e-mail and other types of information.

It also owns valuable licenses to provide paging service around the nation.

While those assets make it an attractive acquisition target, PageNet's financial picture is weak.

The company recently defaulted on $1.2 billion in bonds because it was unable to make enough money from its operations to repay the debt.

Metrocall said it has asked PageNet's board of directors to decide by July 25 whether it will go ahead with necessary financial due diligence.

It also wants the board to decide by Aug. 15 whether to endorse the bid.

The Arch-PageNet combination has already received approval from the Federal Communications Commission and the U.S. Department of Justice.

However, the Securities and Exchange Commission hasn't given the companies the go-ahead to formally submit the deal to their investors.

PageNet's fate will now probably be worked out in bankruptcy court – the company is expected to try to convert the involuntary bankruptcy into a voluntary Chapter 11 reorganization procedure – but Arch still needs SEC permission to poll its investors.

Metrocall had tried to counter Arch's bid for PageNet, but it backed down less than a month ago after some bondholders refused to sign a confidentiality agreement.

Metrocall shares fell 13 cents to $6.37.

Arch shares fell 9 cents to $5.91.

PageNet shares last traded on Friday, when they fell 22 cents to $1.09.