A Sept. 28 Business article on Leucadia National Corp.'s decision to sell its stake in MCI Corp. incorrectly described the firm as a private concern. The investment firm is a public company whose stock trades on the New York Stock Exchange. (Published 9/29/04)
A private buyout firm that had said it was seeking to take control of MCI Inc. has sold its 5 percent stake in the long-distance giant for a $20 million pretax profit.
New York-based Leucadia National Corp. had invested $245.9 million in MCI since August, and the company said it was interested in claiming a majority stake. The pronouncement led to speculation that a bidding war could erupt for MCI just months after it emerged from Chapter 11 reorganization in April.
But no other potential bidders have emerged as MCI continues to struggle in an industry roiled by intense competition and falling revenue.
Leucadia said in regulatory filings yesterday that it had sold all its stock in Ashburn-based MCI. The investment firm provided no explanation for its decision. It said the move "should not be interpreted to mean that the Company is no longer interested in acquiring control of MCI." But the investment firm also said that it could offer no assurance that it will continue to pursue its bid.
MCI declined to comment yesterday. The company recently hired investment advisers to guide it through a potential sale and to attract other potential bidders. Leucadia officials were unavailable yesterday. Stephen M. Besen, Leucadia's outside attorney, declined to comment yesterday.
It was not clear yesterday whether MCI would pursue other buyers for the company's assets.
Since revealing its intentions to acquire MCI in July, Leucadia has declined to publicly discuss its plans, revealing its intentions and actions only through terse regulatory filings with the Securities and Exchange Commission. Leucadia has a broad portfolio of investments, with such diverse holdings as wineries and mining interests.
It also owns two small telecommunications companies, WilTel Communications Group Inc. and ATX Communications Inc. Leucadia acquired both companies while they were in bankruptcy proceedings.
Leucadia's decision to sell its stake in MCI was announced after the close of the markets yesterday. Shares of MCI fell less than 1 percent to close at $16.92. Shares of Leucadia closed at $56.27, up less than 1 percent.
MCI, like its larger rival AT&T Corp., is struggling to find a footing as competitors eat away at its residential long-distance business. Regional telephone giants such as Verizon Communications Inc. and BellSouth Corp., freed by regulators to enter the long-distance business, have been luring away millions of customers each year. The new customers are attracted by offers of unlimited local and long-distance calling for one flat rate.
In contrast, AT&T, MCI and other long-distance competitors say recent federal court rulings make it virtually impossible for them to continue to offer competing calling packages because they are no longer guaranteed discounts for routing calls over local phone networks.
Although its revenue continues to decline, MCI has emerged from reorganization with more than $4 billion in cash on its books, a balance that some analysts believe may have initially attracted Leucadia.