Qwest down, but not out
Notebaert open to renewing fight should MCI shareholders replace board
By Ross Wehner, Denver Post Staff Writer
Friday, May 6, 2005
Qwest chief executive Richard Notebaert said Thursday he would consider getting back in the fight for MCI if shareholders launched an effort to replace the MCI board.
"One always needs to keep an open mind," said Notebaert, who berated the MCI board for not negotiating in good faith with Qwest.
"Every offer we made was totally unsolicited and was not warmly received," he said in an interview with The Denver Post. "It was a poor way to run an auction."
Notebaert pulled out of a three-month bidding war with New York-based Verizon for MCI on Monday. But he never used the word "withdraw" in a letter that blasted the MCI board for running a process that was "permanently skewed against Qwest."
In an earnings call Tuesday, he also sidestepped questions about Qwest's future intentions.
On Thursday, Oren Shaffer, Qwest's chief financial officer, held private meetings in Washington with several MCI shareholders who are urging Qwest to launch a hostile bid for MCI, sources close to the situation confirmed.
Shaffer was there speaking at a conference.
One of the topics of the private meetings was Qwest's options, which include the Denver-based phone company working with MCI shareholders to defeat the Verizon-MCI merger, the sources said.
In reaction to Shaffer's speech, Morgan Stanley analyst Simon Flannery wrote, "Qwest appeared to not rule out further pursuit of MCI."
But he said Qwest has given up hope of working with MCI's board or management.
David Barden, a Banc of America Securities analyst, said in a research note this week that Notebaert's letter "could be an invitation to MCI shareholders to circle the wagons and work to bring Qwest back into the process."
MCI first agreed to merge with Verizon on Feb. 13, and shunned higher bids from Qwest in the following weeks. MCI's board eventually embraced a $30-a-share offer from Qwest on April 23.
But Monday, MCI once again spurned Qwest in favor of Verizon's sweetened $26-a-share bid.
Notebaert said Thursday the MCI board had only been waiting for a higher Verizon offer to justify MCI's previously agreed-on merger with Verizon. That deal is headed to a MCI shareholder vote this summer.
Notebaert denied, however, that Qwest had been used by MCI and the hedge funds that own a majority of MCI to gain a higher price from Verizon.
"We saw real synergies and an opportunity to create shareholder value with MCI," Notebaert said. "But we also had our walk-away price."
Notebaert declined to say how much money Qwest spent on bankers, lawyers and other aspects of the pursuit of MCI, which began in July.
"We didn't do a proxy fight or a lot of other expensive things," he said. "It was a very good investment. We have been getting a lot of positive feedback from Qwest customers."
Denver financier Philip Anschutz was not asked to back Qwest's bid for MCI because he already owns 18 percent of Qwest, Notebaert said.
"I don't think you could ask him to put more cash in," Notebaert said. "At the end of the day, this was not a financing problem."
Staff writer Ross Wehner can be reached at 303-820-1503 or firstname.lastname@example.org