The Justice Department has given a New York investment firm permission to acquire a controlling stake in MCI Inc., bringing the long-distance giant one step closer to a possible sale just four months after it emerged from bankruptcy.
But Leucadia National Corp. has not yet made a formal offer for MCI, and it is not clear whether it will pursue a takeover of the Ashburn-based telecommunications firm.
Leucadia officials declined to comment yesterday, and the firm's regulatory filing with the Securities and Exchange Commission made only passing reference to a potential bid for the phone company. "We cannot assure you that we will acquire control of MCI," Leucadia said in its filing.
Since MCI emerged from bankruptcy protection in April, it has continued to struggle with its core long-distance business. Like AT&T Corp., which announced last month that it would no longer market its services to consumers, MCI is also focused chiefly on large business customers. When it emerged from bankruptcy, MCI reported 20 million customers; now it claims to have fewer than 10 million.
Industry analysts have long speculated that both AT&T and MCI are likely takeover targets. MCI officials declined to comment yesterday.
Leucadia is a 30-year-old investment firm that has a reputation for keeping a low profile. Its holdings include mining companies and wineries. It owns two relatively small telecommunications companies, WilTel Communications Inc. and ATX Communications Inc. Leucadia acquired both companies while they were in bankruptcy.
Shares of MCI fell 7 cents, or less than 1 percent, yesterday to close at $16.48.
On July 8, Leucadia notified the Justice Department's antitrust division that it was interested in acquiring a 50 percent stake in MCI. That effectively set an Aug. 9 deadline for the Justice Department to object to the potential deal or extend the deadline with a request for additional information. The government allowed the deadline to pass without taking action.
MCI officials have declined to comment on the potential Leucadia bid, but the company does have a poison-pill provision in its bylaws that would make a hostile takeover difficult. Under the provision, shareholders would be able to buy additional shares at a discounted rate should a hostile investor acquire a stake of 15 percent or more in the company -- making a purchase far more costly.
However, at least one of MCI's major shareholders, MatlinPatterson Global Advisers LLC, has indicated in its own regulatory filings that it would consider a sale.
