Leucadia National signals interest in controlling stake of MCI Inc.

Monday, July 12th 2004, 12:18 pm

By: News On 6

NEW YORK (AP) _ Leucadia National Corp., a holding company, said it will seek antitrust clearance to buy more than 50 percent of the stock in MCI Inc., the nation's No. 2 long-distance carrier.

New York-based Leucadia notified MCI that it intends to make a filing with the Federal Trade Commission and the Department of Justice to purchase the majority stake, MCI said in a brief news release.

Shares in MCI, which changed its name from WorldCom after emerging from an accounting scandal that forced the nation's largest ever bankruptcy, rose 10 percent, or $1.45, to $16.05 in midday over-the-counter trading. At that price, the total value of all of MCI's outstanding stock was about $5 billion. Shares of Leucadia gained 66 cents to $49.59 in trading on the New York Stock Exchange.

MCI, which emerged from bankruptcy protection in April, and its chief rival AT&T Corp., the nation's largest long-distance carrier, have been weakened by price wars and court rulings that will likely increase their costs to compete in the lucrative local-service market.

In June, The Wall Street Journal reported that MCI was a likely take over target, saying Sprint Corp., SBC Communications Inc. and BellSouth had done preliminary evaluations.

Leucadia is a holding company that owns businesses ranging from telecom company WilTel, to a company that makes plastic netting used on construction sites, a copper mine in Spain, two wineries, banks, a hotel in Hawaii and vacant land in Washington, D.C.

Leucadia had $2.03 billion cash and investments at the end of January, according to Standard & Poors. The company spent more than $779.2 million in cash and stock to buy WilTel in 2002 and 2003.

A low-profile company, Leucadia has 5,269 employees, according to S&P and only recently set up a Web site. Its three top officers have all been with the company since the late 1970s.

WilTel is a telecom carrier that owns fiber optic loops in 35 cities including New York, San Francisco and Philadelphia. Its largest customer is SBC Corp., which accounts for 65 percent of its revenues. In its annual report, Leucadia lists MCI as one of WilTel's competitors.

MCI, based in Ashburn, Virginia, filed for bankruptcy protection in 2002 following an $11 billion accounting fraud. The company has a ``poison pill'' provision in its bylaws that would make a takeover more difficult and expensive.

MCI spokesman Peter Lucht would not comment on whether Leucadia had been in contact with the company beyond providing notice of its government filings.

The notice does not mean Leucadia has actually made an offer to obtain a controlling stake, he said. ``There is nothing actionable here for the board of directors,'' he said.

A spokeswoman for Leucadia did not immediately return calls seeking comment.