BellSouth Corp. shareholders on Friday morning voted overwhelmingly to approve the companys $67 billion merger with AT&T Inc., despite misgivings from employees about the future of their jobs and retirement benefits.
This is a significant step in the merger approval process, said F. Duane Ackerman, BellSouths chairman and CEO. He said preliminary results indicated the vote at 97 percent in favor of the transaction.
The vote took place during a special shareholders meeting on Friday in Atlanta.
Shareholders will receive 1.325 AT&T shares for each BellSouth share, based on March 3, 2006, pricing. March 3 was the last day BellSouth traded on the stock market before the merger was announced.
The vote was taken after shareholders were allowed to ask questions and make comments relative to the merger. Not surprisingly, much of employees concerns stemmed from big payouts for executives, and uncertainty about job stability and retirement benefits.
One BellSouth retiree told Ackerman, I think that the executive board has not done their fiduciary responsibilities theyre just protecting their own selves and not protecting their retirees. Ackerman did not respond. Indeed, Forbes Magazine recently named Ackerman as one of the highest-compensated CEOs in the United States thanks to his nearly $14 million per year salary.
The 63-year-old Ackerman has pledged to retire once the merger is completed, and stands to do so in style. According to the AT&T-BellSouth proxy statement, he will receive severance pay of $9.2 million, as well as approximately $36.9 million resulting from restricted stock, restricted stock units, stock options and performance shares.
Meeting participants brought up several other concerns, including Thursdays approval by a California federal judge for a lawsuit to proceed against AT&T for giving the National Security Agency access to consumers phone records. The case was brought earlier this year by the Electronic Frontier Foundation (EFF). Both AT&T and the government sought dismissal of the case. The government cited state secrets privilege, but the judge disagreed.
Barry Steinhardt, director of the technology and liberty program for the ACLU, asked Ackerman why BellSouths proxy statements did not disclose the pending litigation, and is the BellSouth board concerned about the possibility the litigation might succeed and the combined company could be liable for tens of millions of dollars?
Ackerman refused to discuss the case, saying only, Obviously we believe this will have a consequence. Another BellSouth executive said the litigation details were made public in AT&Ts filings with the FCC, when Steinhardt again asked why the case was absent from the proxy statements.
Still other shareholders, mostly retirees or current employees, voiced their fears about reduced health care benefits or job losses. Ackerman assured former employees that if they are retired, the pension plan will continue. You should see no change. He added AT&T and BellSouth each retain the right to change health care benefits.
The AT&T-BellSouth merger appears to be on schedule, Ackerman told shareholders. He said if all goes as expected, the combination should take place in October or November. The companies are waiting on the Justice Department, the FCC and a number of state approvals.
This Bell transaction might not get the rubber-stamp approval AT&T and SBC Communications and Verizon Communications Inc. and MCI Inc. all received last year, however. Competitive carrier associations and public interest groups are using the legal system to try and get the government to require those carriers to divest more than some of their unused dark fiber, claiming the mergers have negatively impacted consumers. The Department of Justice last fall said such a move would satisfy antitrust statutes.
The case has been ongoing since early May. The parties have been trying to convince Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia to perform an independent inquiry into whether the public interest is being served by the elimination of long-distance operators AT&T and MCI. The case is based on the 1974 Tunney Act, which requires federal courts to approve antitrust consent decrees, or agreements, filed by the Department of Justice. A 2004 amendment allows a judge to independently determine whether mergers have served the public good. Cases based on the Tunney Act presume the government failed to consider the publics best interest.
The outcome of the case will have direct implications for AT&Ts expected acquisition of BellSouth. In spite of the long odds that CLEC legal challenges to already approved mergers would be successful, Sullivan has taken the case and appears serious about examining DoJ’s consent decree, said Jessica Zufolo, telecom analyst for Medley Global Advisors LLC in a July 13 research note, adding, FCC and DoJ officials may move more cautiously in examining the [AT&T-BellSouth] transaction and possibly take more aggressive steps to avoid additional legal complications in federal court. Increased public pressure on all federal agencies to apply a greater scrutiny in mergers may result, regardless of the outcome of this case.
BellSouths Ackerman remained optimistic on Friday, saying he expects the AT&T-BellSouth merger to close in the fall.