- The Washington Times - Thursday, February 17, 2005

DENVER (AP) — Qwest Communications International Inc. said yesterday it will submit another bid for MCI Inc., four days after the long-distance company agreed to be acquired by Verizon Communications Inc. in a $6.7 billion cash and stock deal.

Qwest Chairman and Chief Executive Officer Dick Notebaert told the MCI Board of Directors by letter that Qwest would make a modified offer and hoped that it would lead to new discussions.

Qwest officials are reviewing the details of the proposed Verizon-MCI merger, Mr. Notebaert said, but noted that the Verizon proposal was substantially less than the Qwest bid, based on public comments this week from MCI President and CEO Michael D. Capellas.

The value to MCI shareholders from 40 percent of the synergies in the Qwest bid would “substantially exceed” the value of synergies under the Verizon bid, Mr. Notebaert said.

“To date, we have not received any response from MCI or its advisers on the terms of our Feb. 11 proposal, as reconfirmed on Feb. 13,” Mr. Notebaert wrote. “If we had received this response, we may have been already able to communicate to you a modified offer that would be beneficial to MCI shareholders.”

The letter was contained in a Securities and Exchange Commission filing yesterday. A Qwest spokesman declined immediate comment.

Verizon declined to comment specifically on the Qwest filing. “The facts are that the MCI board and the [Verizon] board both approved the transaction, and there is a signed letter of agreement,” spokesman Eric Rabe said in an e-mail.

MCI did not immediately respond to a request for comment.

Qwest on Wednesday released terms of its failed bid, saying that the total effective value was about $8 billion, including $1.60 a share in dividends, which was more than $1 billion more than Verizon’s offer.

Denver-based Qwest offered $23 a share to MCI stockholders, consisting of $7.50 a share in cash and $15.50 of Qwest common stock, based on a fixed exchange ratio of 3.735 Qwest shares per MCI share.

Analysts said Verizon, the dominant local phone company in the Northeast and a top cellular phone player, likely won MCI’s favor because it is larger and in better financial shape than Qwest, the local phone carrier in 14 Western and Midwestern states.

Qwest is weighed down by more than $17 billion in debt, lack of a wireless division, and competition from cable and high-speed-data companies.

Janco Partners research analyst Donna Jaegers said it could be a win-win situation for Qwest.

“If they sweeten their bid enough and they get MCI, then they improve their balance sheet,” she said. “Worst case is they force Verizon to pay more money so they make them less competitive. I don’t see a whole lot of risk in Notebaert doing this.”

Qwest shares closed down 13 cents, or 3.3 percent, at $3.84 a share on the New York Stock Exchange. The filing was made after the markets closed. In after-hours trading, the shares jumped 19 cents, or 4.9 percent.

MCI shares, which finished the regular session down 21 cents at $20.66 on the Nasdaq Stock Market, rose 84 cents, or 4 percent. Verizon shares fell 44 cents to close at $35.68 on the NYSE.

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