Juneteenth set to become federal holiday Loki's hidden detail in credits Ant-Man 3 Best early Prime Day deals 12 big Prime Day deals IRS child tax credit portal opens

Star renegotiates PT-1 buy

The long distance provider says it has renegotiated the terms of its proposed acquisition of PT-1 Communications because the SEC rejected its bid.

Long distance provider Star Telecommunications today announced that it has renegotiated the terms of its proposed acquisition of PT-1 Communications because the Securities and Exchange Commission rejected its bid based on the accounting treatment used for the acquisition.

Under the renegotiated terms, the acquisition price will include issuing 15 million shares of Star common stock and $20 million to PT-1 stockholders. In June, Star had announced it planned to acquire PT-1 for 21 million Star shares.

The company said in a statement that it will reduce its purchase price and the transaction will now be subject to purchase accounting treatment. The SEC rejected the pooling treatment because of a PT-1 stock purchase of a founding partner's PT-1 ownership interest in 1997.

The acquisition is subject to final shareholder, regulatory, and antitrust approvals, and is now expected to close early in the fourth quarter of 1998.

"The reduction in shares from the original purchase price will offset the annual goodwill expense," said Kelly Enos, Star's chief financial officer.

Taking into account market conditions at the closing, the revised merger price is estimated to have a market value of approximately $195 million, placing the current value of the acquisition at approximately less than half of PT-1's annualized revenue at the current run rate, according to Star's statement.

"The change to purchase accounting enables us to secure long-term relationships with distributors and key employees through stock incentives which would have been prohibited under pooling rules," Star chairman and CEO Christopher Edgecomb said.