Update 6: Qwest to Renew Bid for MCI
02.18.2005, 12:17 AM
Qwest Communications International Inc. isn't ready
to give up on its campaign to acquire MCI Inc.
Qwest plans to submit a renewed - and possibly
sweetened - bid for MCI after being snubbed by the long-distance company in
favor of a $6.7 billion cash-and-stock bid from Verizon earlier this week.
In a letter to the MCI board dated Thursday, Qwest
Chairman and CEO Dick Notebaert said he hoped the modified offer would lead
to discussions, noting that MCI never responded to Qwest's initial bid.
"If we had received this response, we may have been
already able to communicate to you a modified offer that would be beneficial
to MCI shareholders," he wrote.
The Verizon proposal was substantially less than
the Qwest bid based on public comments this week from MCI President and CEO
Michael D. Capellas, Notebaert said.
"We would like to advise you that once we have
completed our review of the Verizon merger agreement, we do intend to submit
a modified offer to acquire MCI," he wrote.
The letter to Ashburn, Va.-based MCI was contained
in a Securities and Exchange Commission filing Thursday.
Verizon declined specific comment. "The facts are
that the MCI board and the (Verizon) board both approved the transaction and
there is a signed letter of agreement," spokesman Eric Rabe said in an
MCI did not respond to a request for comment.
Qwest spokesman Tyler Gronbach said the company has
received a lot of calls from both large and small MCI shareholders seeking
more information about the Qwest bid.
Qwest on Wednesday released terms of its failed
bid, saying that the total effective value was about $8 billion, including
$1.60 a share in dividends, which was more than $1 billion above Verizon's
Denver-based Qwest offered $23 a share to MCI
stockholders, consisting of $7.50 a share in cash and $15.50 of Qwest common
stock, based on a fixed exchange ratio of 3.735 Qwest shares per MCI share.
Verizon proposed a deal in shares, cash and
dividend payments valued at $6.76 billion, or about $20.75 a share.
Analysts 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, the local
phone carrier in 14 Western and Midwestern states.
Qwest is weighed down by more than $17 billion in
debt, the lack of a wireless division and competition from cable and
high-speed data companies.
Janco Partners research analyst Donna Jaegers said
it could be a win-win situation for Qwest. "If they sweeten their bid enough
and they get MCI, then they improve their balance sheet," she said. "Worst
case is they force Verizon to pay more money so they make them less
competitive. I don't see a whole lot of risk in Notebaert doing this."