MCI Board Plans Meeting to Weigh Latest Qwest Bid
By ALMAR LATOUR and JESSE DRUCKER Staff Reporters of THE WALL STREET JOURNAL
March 23, 2005; Page A3
http://online.wsj.com/article/0,,SB111154314899287231,00.html?mod=telecommunications%5Fprimary%5Fhs
The board of MCI Inc. is scheduled to meet today to weigh the most recent takeover offer from Qwest Communications International Inc.
With Qwest's current offer now 25% higher than the $6.75 billion merger MCI struck with Verizon Communications Inc. last month, pressure is mounting on board members to at least declare that Qwest's bid has the potential to be a superior deal, according to people familiar with the situation.
Under the merger agreement with Verizon, such a declaration would give MCI the authority to engage in further discussions with Qwest. Several issues between Qwest and MCI have yet to be resolved, according to these people.
A decision by MCI's board that Qwest's bid could lead to a deal that is potentially superior to Verizon's wouldn't guarantee that MCI's board ultimately would choose Qwest's offer. And Verizon still could raise its bid closer to the roughly $8.4 billion Qwest offer.
MCI said last week that it would respond to Qwest's latest bid by March 28, though a decision also could be announced this week, according to people close to the situation.
In recent weeks, MCI shareholders and Qwest's chief executive have mounted a high-profile campaign to persuade MCI's board to reconsider its February agreement to be acquired by Verizon, the nation's largest local phone company. The deal was struck just two weeks after MCI rival AT&T Corp. agreed to be acquired by SBC Communications Inc. MCI board members chose Verizon, with a stock market value of roughly $100 billion, over the financially struggling Qwest.
Qwest's bid is $5.25 a share higher than the accepted offer from Verizon. The size of that spread makes it difficult for MCI to justify staying with the current Verizon offer, some investors and lawyers say.
MCI still eventually could go with a deal from Verizon, even with a deal that is nominally lower than Qwest's, since it would be seen as a less-risky deal. But the gap between the two offers must be narrower for MCI's board to avoid the risk of shareholders voting it down.
Both the Verizon and Qwest bids include an MCI dividend that the company already has paid to its shareholders.
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