Qwest to renew bid for MCI
Thursday, February 3rd 2005, 9:19 am
By: News On 6
DENVER (AP) _ Qwest Communications International Inc. said Thursday 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 CEO 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, 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.
It is possible that Qwest may sweeten its offer based on what executives learn in the review, Qwest spokesman Tyler Gronbach said.
``We need to be thoughtful and careful and take a look at this merger agreement that's been filed, and then come back and make a modified offer for MCI,'' he said.
In the letter, Notebaert said 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, 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,'' 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 Thursday.
Verizon declined specific comment. ``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 above 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.
Verizon proposed a deal in shares, cash and dividend payments valued at $6.76 billion, or about $20.75 a share.
Analysts said Verizon, the dominant local phone company in the Northeast and a top cellular 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, the 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.''