Qwest Communications International Inc. yesterday pressed ahead in its efforts to win MCI Inc., adding $1.1 billion in cash to its previous bid for a total offer of $8.9 billion.
In a six-week bidding war, this is Qwest's third attempt to break up MCI and Verizon Communications Inc.'s planned merger. MCI and Verizon first announced an agreement to merge on Feb. 14 and this week reaffirmed their plans after Verizon raised its offer to $7.65 billion.
Qwest, with headquarters in Denver, would be dwarfed and disadvantaged by a combined MCI-Verizon, its chief executive has argued.
(David Zalubowski -- AP)
MCI's board of directors had said that it rejected Qwest's previous bid of $8.45 billion, although it was higher than Verizon's, because the company is not as financially strong.
Verizon has the right to call for a MCI shareholder vote on its offer as early as June. Verizon officials declined to comment on Qwest's latest offer.
Some MCI shareholders said yesterday that Qwest's new bid, which includes less in stock than its previous offer, is clearly better than Verizon's.
"We think it's an outstanding offer," said John Paulson, president of Paulson & Co., which owns 3.8 percent of MCI's shares. "Verizon is a stronger company that Qwest, but that's not the question we're being asked." He said an offer of $27.50 a share from Qwest is "a clearly superior" deal, compared with the $23.10 a share Verizon offered.
Ashburn-based MCI is considered an essential asset for Qwest, in part because a merger between Verizon and MCI would dwarf the smaller Denver company. Qwest chief executive Richard C. Notebaert has said that a combined MCI-Verizon would massively handicap other companies trying to compete. In addition, MCI has $5.5 billion in cash and cash equivalents, while Qwest is more than $17 billion in debt and is losing revenue.
Qwest argues that its deal isn't getting fair consideration by MCI's board of directors.
"At no time during your board deliberations on Monday did any Board member, MCI management representative, or MCI advisor ask Qwest whether it had received Qwest's best and final proposal," Notebaert wrote in a letter to MCI's board dated yesterday. He said the company would withdraw the new offer at midnight April 5.
Moreover, Notebaert said, MCI changed the terms of its agreement with Verizon, giving Verizon too much leeway to determine when MCI shareholders could weigh in on the proposed merger.