The deal announced Thursday would enable the merged company to offer business customers in Canada everything from long-distance to Internet to local phone service.
It would also extend AT&T's strategy of creating a one-stop shop for telecommunications.
AT&T, the biggest U.S. long-distance provider, initially plans to merge its AT&T Canada operations with MetroNet's business in a company to be called AT&T Canada Corp.
The new company would have annual revenue of about $925 million, more than 4,000 employees and over $2.3 billion in assets.
The merger will be carried out in several stages. After the first stage, MetroNet shareholders would indirectly own 69 percent of the merged company and AT&T would have the remaining 31 percent.
The second stage of the deal will occur after the companies receive regulatory approval for the merger. AT&T has agreed to buy all of MetroNet's shares for at least $75 (Canadian) per share, $49.50 at current exchange rates, or the appraised fair market value of Metronet shares at the time.
At the minimum price, that would value MetroNet's 45.5 million shares at about $2.3 billion. The payment would be cash, stock or some combination.
The deal has been approved by the boards of both companies, but it must be approved by MetroNet shareholders at a meeting expected to be held in May.
But if AT&T doesn't purchase the shares before June 30, 2000, the minimum price per share would be increased by 16 percent a year through June 30, 2003.