- The Washington Times - Sunday, April 10, 2005


Verizon Communications Inc. said it is paying $1.1 billion to acquire a 13.4 percent stake in MCI Inc. directly from the Ashburn, Va., company’s largest stockholder.

The transaction removes a major wild card in Verizon’s bid to fend off a higher-priced offer to acquire MCI by Qwest Communications International Inc. of Denver.

The New York telephone company is paying $25.72 per share in cash to Mexican billionaire Carlos Slim Helu, who previously had expressed dissatisfaction with the offers from both Verizon and Qwest.

The deal values Mr. Slim’s 43.4 million shares at an 11 percent premium to the $23.10 per share Verizon agreed to pay MCI’s other shareholders two weeks ago in a sweetened $7.5 billion deal.

Verizon Chief Executive Officer Ivan Seidenberg appeared to leave open the prospect that Verizon might increase its payout to the other MCI shareholders.

“While this was an opportunity for us to purchase a block of shares under unique circumstances and is an important step forward in our acquisition of MCI, we will continue to assess the situation as we move toward a vote by the MCI shareholders,” Mr. Seidenberg said.

Meanwhile, William H. Miller III, an opponent of the proposed merger between phone companies MCI and Verizon, indicated he may put his Baltimore investment firm’s money into backing Qwest’s bid.

Mr. Miller supports Qwest in the bidding war for MCI and has said he would vote against an MCI-Verizon merger. He ventured further into the fray on Friday by suggesting he would consider funneling money into Qwest to help the Denver company bolster its bid.

Such an investment from Legg Mason Inc., a major Qwest shareholder, would be out of the ordinary for mutual fund firms, which typically voice their opinions in corporate governance matters by voting their shares for or against mergers and other proposals that are subject to shareholder approval.

“That is unusual,” Jeff Kagan, an independent telecommunications analyst, told the [Baltimore] Sun. “But Qwest wants the deal real bad. They’re not ready to walk away.”

MCI has rejected offers from Qwest three times and instead has chosen to partner with Verizon, even though Verizon is offering less money. MCI’s board of directors has expressed concerns about Qwest’s finances. The board kept open the prospect of further talks even as it announced last week that it preferred Verizon’s $7.5 billion bid. Qwest’s offer was $8.94 billion.

Qwest criticized Verizon’s deal with Mr. Slim and said it would continue its pursuit of MCI.

“By entering into its deal with Slim, Verizon has both created two classes of shareholders and called into question the MCI board’s previous determination that Verizon’s lower offer to the other MCI shareholders was superior and fair,” Qwest said Saturday. “We believe Qwest has a superior proposal for all shareholders.”

MCI spokesman Peter Lucht declined to comment.

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