Verizon Communications Inc. announced this morning that it has
agreed to buy MCI Inc. in a deal it valued at $6.7 billion in cash, stock
The merger comes amid a rush to consolidate in the
telecommunications industry that has seen SBC Communications Inc. agreeing
to acquire AT&T Corp. and Sprint Corp. agreeing to buy Nextel
The boards of Verizon and MCI have approved the acquisition, which
requires shareholder as well as regulatory approval. The company, in a
statement, said it expects approval to take about a year.
MCI Inc. board members accepted the offer last night after
rejecting a sweetened and higher bid from Qwest Communications International
Ltd., sources close to the negotiations said. Qwest, the rejected suitor,
could attempt to challenge the Verizon-MCI deal.
Ashburn-based MCI, which was founded in Washington and traces its
lineage to Microwave Communications of America Inc. in 1968, was known for
pioneering competitive long-distance calling options in the 1980s.
The company also owns an Internet network that carries a large part
of the world's online traffic.
Among the reasons that MCI accepted a lower bid, sources said, was
that Verizon is considered a better strategic fit and a more financially
stable company than Qwest, and thus offers better long-term value to MCI
"It is a natural and logical extension of Verizon's strategy to
transform our company to serve growth markets and offer broadband
technologies," Verizon Chairman and CEO Ivan Seidenberg said in a written
statement. The acquisition, he added, "accelerates Verizon's growth plan in
the enterprise market, and it facilitates our becoming a major provider
sooner and less expensively than if we had continued on a path of organic
Company officials said the agreement would result in about 7,000
job cuts from the combined work force of about 250,000 employees, the
Associated Press reported.
According to this morning's announcement, MCI
shareholders will receive 0.4062 shares of Verizon stock for each share of
MCI. Based on Verizon's closing price Friday of $20.75, Verizon put the take
at $14.75 per share for MCI shareholders for a total value of $4.795