Putting a stronger squeeze on MCI Inc. directors, which have already voted twice to be purchased by Verizon, Qwest has increased its offer to $9.7 billion in cash and stock -- more than $2 billion above a rival offer from Verizon.
With its new offer, according to The New York Times, Qwest has met many of the conditions that MCI's board said two weeks ago were needed for Qwest to have a chance to outmaneuver Verizon.
Qwest said its new offer was its "best and final" bid. It asked MCI's board to respond by Saturday at 5 p.m., East Coast time. As of the first coffee this morning MCI had not responded.
According to The Associated Press, MCI directors – who have twice embraced Verizon over Qwest – could now be forced to accept a far higher offer of $30 per share, about 30 percent more than the $23.10 a share buyout deal MCI has accepted from Verizon Communications Inc.
The Qwest bid consists of $16 a share in cash -- about $2.50 higher than the previous offer -- using $800 million in equity commitments from MCI shareholders, Qwest CEO and Chairman Dick Notebaert said in a statement. Those shareholders who would contribute own more than 13 percent of MCI's outstanding stock, Qwest said.
The remaining $14 would be paid in Qwest stock, based on an exchange ratio of 3.373 Qwest shares per MCI share. A guarantee to protect Qwest's stock price remained in place.
It also includes an additional $1 billion in committed financing to ease concerns about whether the combined company would have the financial resources to compete, Notebaert said in a letter to MCI's board.
MCI spokesman Peter Lucht said the company would review the revised Qwest offer. "We've received the latest revised offer from Qwest and our board will review it carefully as it has all previous offers," he said.
"This is a huge endeavor to try to integrate these two companies," Janco Partners analyst Donna Jaegers told the Associated Press. "I don't think they'll realize the synergies."
Twice previously, MCI directors have rejected Qwest as a suitable choice because of its heavy debt and worries over the long-term value of Qwest shares.
The competition underscores the rush to merge in an industry where MCI is the last major independent carrier serving large corporations.
MCI's board cited Qwest's relative weakness as a big reason it accepted Verizon's far lower offer, The Times reports. The board cited Qwest's heavy debt load and dimmer business prospects, and said Verizon offered a better chance to compete in a market dominated by ever-larger players.
The latest bid, described as Qwest's "best and final," will be withdrawn if it is not declared superior and Verizon is not notified by 3 p.m. EDT on Saturday, Notebaert said.
The MCI board two weeks ago accepted a $7.5 billion cash-and-stock offer from Verizon, valued at $23.10 per share, up from $20.75 under the original agreement those companies reached in mid-February.
In a statement, Verizon said, "As we move through the proxy process, we will continue to assess the situation and intend to take the necessary steps at the appropriate time to secure shareholder approval and complete our pending transaction."
The MCI board has voiced concerns about Qwest's financial health -- it has $17 billion in debt -- and the long-term value of the shares Qwest would use as partial payment to MCI shareholders. It also has questioned whether Qwest could meet its forecast of nearly $3 billion a year in cost savings from the proposed merger.
New York-base Verizon said it is paying $1.1 billion to acquire a 13.4 percent stake in MCI from its largest single stockholder, Mexican billionaire Carlos Slim Helu. The deal values Slim's 43.4 million shares at an 11 percent premium to the $23.10 per share Verizon agreed to pay MCI's other shareholders.
David Sims is contributing editor and CRM Alert columnist for TMCnet.
To discover how contact centers can save money and increase productivity by making the switch to IP Telephony, be sure to attend TMC's IP Contact Center Summit May 24-26, 2005, in Dallas, Texas. IP Contact Center Summit is co-located with the Speech-World conference, where you can get expert guidance in the deployment of speech technologies to strengthen customer relationships.
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