BY MIKE BOYER
The Cincinnati Enquirer
Shareholders of Cincinnati Bell Inc. will receive one share of Convergys Corp. for each Bell share they own on Dec. 1, under a distribution plan announced Thursday.
The distribution of 137 million Convergys shares, effective Dec. 31, will complete the spinoff of Cincinnati Bell's high-growth customer billing and customer care businesses into a separate, publicly traded company as announced last spring.
The company said the Internal Revenue Service has determined the spinoff of Convergys will be tax-free for Bell shareholders. Convergys, created from the former Matrixx Marketing and Cincinnati Bell Information Systems subsidiaries, made an initial public offering of 15 million shares, representing about 9 percent of the company, on Aug. 15.
Robert J. Venable, telecommunications analyst with Robert W. Baird & Co., said, "separation is good over the long term for the shares of both Cincinnati Bell and Convergys because it allows both stocks to trade closer to their true value."
Cincinnati Bell's shares, which closed Thursday at $30.18ó, up 18ó cents, have been trading at a price that reflects the value of Bell's telecommunications business and Convergys.
In December, Cincinnati Bell's shares will begin trading on a when-issued basis to reflect the value of the shares minus Convergys. Based on Convergys' close Thursday of $17, up 31ì cents, Bell will trade at about $13 a share.
"We think that's undervalued," said Mr. Venable. Based on a target price of $31 a share for the combined companies, Baird recently valued Cincinnati Bell's telecommunications business at $16 a share and Convergys at $15.
Convergys also announced it has adopted a shareholder rights plans similar to that of Cincinnati Bell. The company said the move was a precaution and not in response to a specific threat.
Bell's board also elected Richard G. Ellenberger, chief operating officer and president of its Cincinnati Bell Telephone subsidiary, a director. Mr. Ellenberger, 46, will succeed John LaMacchia, 57, as Cincinnati Bell Inc.'s president and chief executive when Mr. LaMacchia retires within the next year.
