washingtonpost.com  > Print Edition > Business

MCI Accepts Sweetened Verizon Bid Over Qwest

More Cash Offered; Value of Deal Raised To $7.65 Billion

By Yuki Noguchi
Washington Post Staff Writer
Wednesday, March 30, 2005; Page E01

MCI Inc. and Verizon Communications Inc. reaffirmed their intention to merge yesterday as executives from Qwest Communications International Inc. contemplated whether to pursue a potentially hostile takeover of the Ashburn-based company or walk away from the protracted negotiations.

Following weeks of wrangling, Verizon upped its offer by $900 million in cash, to $7.65 billion in cash and stock, and, for the second time, MCI's board said yes to Verizon.

Deal Evolution
_____Post 200 Profile_____
MCI Inc.
WorldCom Q&A
WorldCom History
_____MCI Coverage_____
Qwest Mulls Proxy Fight For MCI, Will Increase Bid (The Washington Post, Mar 31, 2005)
MCI Accepts Verizon's $7.6B Offer (The Washington Post, Mar 29, 2005)
Qwest Gives MCI a Week to Accept Bid (The Washington Post, Mar 29, 2005)
Story Archive and Company Background
_____Post 200 Profile_____
Verizon Communications Inc.
Stock Quote and News
Historical Chart
Company Description
Analyst Ratings
_____Related Articles_____
Qwest Mulls Proxy Fight For MCI, Will Increase Bid (The Washington Post, Mar 31, 2005)
Qwest Gives MCI a Week to Accept Bid (The Washington Post, Mar 29, 2005)
RFK Sponsorship to Aid Kids (The Washington Post, Mar 26, 2005)
MCI to Continue Talks With Qwest (The Washington Post, Mar 24, 2005)
More Company News

MCI's shareholders, who will have to vote to approve a deal, said that they are still evaluating the merits of Verizon's latest offer and that the situation remains fluid until Qwest reacts.

Qwest's last offer is still higher, at $8.45 billion, and the Denver-based company may raise it further.

"I can understand why the MCI board has chosen Verizon against Qwest's present offer . . . but there is an opportunity for Qwest to come back," said Leon G. Cooperman, founder of Omega Advisors Inc., which owns 9.3 million shares of MCI stock. "Qwest could raise their current offer, which they have to do if they want to win." Cooperman also said he could accept Verizon's offer if it is the final one.

"We still believe our proposal creates superior value for shareowners," Qwest said in a statement. "We are going to assess the situation and determine what is in the best interests of shareowners, customers and employees."

Privately, a source close to Qwest said the company is mulling a counteroffer and said MCI's board did not give Qwest an opportunity to counter Verizon's sweetened offer. The company is talking to MCI shareholders and could consider a hostile takeover bid by trying to buy a controlling stake in the company from them, the source said, speaking on condition of anonymity because the discussions are still going on.

Qwest's board plans to meet today to discuss a possible counteroffer, a source said.

The revised Verizon offer, submitted to MCI on Monday night, added $2.35 in cash and dividends per MCI share, which increased its offer to $23.10 a share. The amount of stock Verizon is offering, 0.4062 Verizon shares for every MCI share, is unchanged, although the new offer includes a provision to protect MCI shares against a drop in Verizon's share price.

Qwest's last offer was for $25.60 a share in cash and stock.

MCI's and Verizon's new agreement also raises to $240 million from $200 million the amount Verizon would receive if the agreement is severed. In addition, there would be up to $10 million in payments to Verizon to reimburse its expenses.

Verizon and MCI first announced that they had agreed to merge on Feb. 14, shortly after SBC Communications Inc. agreed to purchase AT&T Corp. for $16 billion.

"MCI's board has been closely and carefully evaluating all of the recent developments," MCI Chairman Nicholas deB. Katzenbach said in a statement. "We believe Verizon's substantial increase in its offer, the strength of its competitive position and the financial certainty at close make this offer compelling to our shareholders, customers and employees."

Wall Street analysts have said Verizon represents a better deal, in part because it has a better network in the major cities where most of MCI's business customers are based. It also has a wireless unit, which could sell to MCI's corporate customer base, and is investing billions of dollars in a network to deliver cable-like video services. By comparison, Qwest has a local network in 14 mostly rural Western states. It does not have a wireless unit, and it lacks the financial capital to build a new fiber-optic network to sell video services to the home.

CONTINUED    1 2    Next >

© 2005 The Washington Post Company