Qwest ups MCI offer to $8.9 billion
Rages against Board for accepting lower Verizon bid.
By Stacy Cowley and Stephen Lawson, IDG News Service | Published: 10:51, 01 April 2005
Qwest has again raised its offer for rival MCI after a $7.6 million offer by Verizon was accepted earlier this week. Now Qwest has put $8.9 million on the table.
In a letter sent to MCI's chairman yesterday, Qwest CEO Richard Notebaert accused MCI's board of "a complete abdication of its duties" in accepting Verizon's bid without giving Qwest an opportunity to increase its own offer, as Notebaert says Qwest had previously requested. Qwest filed a copy of the letter with the Securities and Exchange Commission.
MCI's Board of Directors has responded by saying it has received the proposal and will review it and respond accordingly.
Qwest is now offering $13.50 cash per share and $14 worth of Qwest stock, for a total value of $27.50 per MCI share. The bid includes a provision allowing Qwest to substitute additional cash for stock.
The Verizon offer MCI accepted comprises $8.75 in cash and Verizon stock valued at $14.75 per MCI share, for a total consideration of $23.50 per MCI share. At the time, Qwest was offering a higher $26 per share, but MCI's board said it had considered industry conditions and its suitors' competitive positions and decided Verizon was the superior bid.
Qwest's new offer extends a ping-pong-like bidding war that broke out in mid-February, when Verizon agreed to buy MCI in a stock-and-cash deal worth around $6.7 billion. Qwest, which had also been in discussions with MCI, quickly followed with its own offer, forcing Verizon to increase its bid.
"We think MCI shareholders should receive the highest price available in the market," Notebaert wrote in his letter. Qwest said its offer will be withdrawn on 5 April if MCI's board does not by then deem it a "superior proposal", a technical term invoking various clauses in MCI's merger agreement with Verizon.