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Qwest ups its efforts to buy MCI

DENVER - Qwest has hired a proxy consulting firm, a clear sign it may bypass MCI's board and ask the long-distance phone company's shareholders to vote on Qwest's $8.45-billion offer as an alternative to MCI's new merger agreement with Verizon.

The Altman Group was hired to augment investor relations for Qwest Communications International Inc., the firm's president, Ken Altman, said Wednesday. He declined to discuss details of the tasks his firm is handling for Qwest.

Investors responded favorably again to the prospect of Qwest persisting with its bid, pushing MCI's shares even further above the $7.64-billion price tag Verizon Communications Inc. agreed to pay Tuesday.

The new deal with Verizon will cost $1-billion more than that company originally agreed to pay in mid February, but is still worth $800-million less than the most recent Qwest bid.

Qwest, with local phone service in 14 Western states and a nationwide fiber-optic network, may submit a sweetened offer to MCI's board or perhaps try a hostile takeover, several analysts said.

Qwest has declined comment on its plans, but chief financial officer Oren Shaffer provided some hints of what's to come on Tuesday. Speaking at an investors conference before MCI's decision was announced, Shaffer said Qwest would consult with MCI stockholders if its bid was rejected.

"Right now, we think that the shareholders' interests and our interests are aligned," he said.

The new Verizon deal values MCI's shares at $23.10 each, not including a 40 cent dividend paid to MCI shareholders this month. Qwest's offer values MCI at $25.60 per share. Both offers include dividends MCI plans to pay before either deal would be completed.

"We do not expect that Qwest will completely abandon its pursuit of MCI and is likely to revise - increase - its offer and officially launch a hostile offer for MCI," Lehman Brothers analysts Andrew Whittaker and Blake Bath wrote in a research note.

Banc of America Securities analyst David Barden believes Qwest will take its bid straight to MCI shareholders.

"We expect any further bid from Qwest to emerge from a consultative process with MCI stockholders that still see a Qwest bid as the best option for maximizing their stock value," he wrote.

Analyst Donna Jaegers of Janco Partners Inc. said the process has been time-consuming for Qwest executives who should be focused on operations. "I'm hoping Qwest gets the message and doesn't up its bid any further," she said.

[Last modified March 31, 2005, 01:27:20]