Qwest rebids $8-billion for MCI, but adds guarantees
Published February 25, 2005
DENVER - Qwest Communications International Inc. submitted a revised $8-billion bid for MCI Inc. on Thursday in an effort to squash the long-distance phone company's plan to be acquired by Verizon Communications Inc.
The revised bid contains a mechanism to guarantee the value of the stock portion of the deal at the time of closing and will speed up the cash payments to shareholders, the company said.
The new bid comes as some key MCI shareholders have questioned MCI Inc.'s decision to accept a $6.7-billion offer from Verizon over an initial $8-billion offer from Qwest.
MCI's board said it would thoroughly review the new Qwest offer, as it has previous offers.
Analysts have said Verizon, the dominant local phone company in the Northeast and a top cellular player, likely won MCI's favor because it is larger and in better financial shape than Qwest - making payment in Verizon's stock a less risky proposition.
Qwest, the local phone carrier in 14 Western and Midwestern states and owner of a national fiber-optics network, is weighed down by more than $17-billion in debt, a weak wireless division and competition from cable and high-speed data companies.
"Verizon has a signed agreement with MCI and (has) a proven track record of completing transactions that create value for shareholders, customers and employees," Verizon spokesman Eric Rabe said.
In its first bid, Qwest offered $24.60 a share to MCI shareholders - $7.50 a share in cash, $1.60 a share in special dividends and $15.50 of Qwest common stock based on a fixed exchange ratio of 3.735 Qwest shares per MCI share and Qwest's recent share price of about $4.15.
The new offer guarantees the stock portion of the deal will hold at $15.50 per share by adjusting the amount of Qwest stock paid if the shares fall below $4.15 per share.
The revised bid also changes the schedule of cash payments to MCI shareholders from four quarterly dividends of 40 cents and a closing payment of $7.50 to a $6-per-share one-time payment upon shareholder approval and a closing payment of $3.10 a share.
"I think it's as expected," research analyst Donna Jaegers of Janco Partners said. "By giving shareholders more money upfront they might sway some of these hedge funds."
If MCI goes with Qwest, it must pay Verizon a $200-million breakup fee.
[Last modified February 25, 2005, 00:51:16]
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