MCI Inc. has rejected Qwest Communications International Inc.’s $8.9 billion offer to buy the telecom company, noting that “as a whole, is not superior” to Verizon Communications Inc.’s revised but lower offer. “MCI was not willing to jeopardize the certainty of its Verizon agreement for the uncertainties surrounding the Qwest proposal,” the company stated in a press release.
MCI’s statement added that its board “reached out to Qwest” seeking improvements on financial terms, certainty of close, and other terms, but that Qwest immediately rejected virtually all those requests and reaffirmed that its latest proposal is its current best offer. According to The Wall Street Journal, MCI asked Qwest to lift its bid of $27.50 per share to $30 and to make assurances that Qwest would stick with the merger if there were customer losses after a deal was signed but before it closed.
In a statement, Quest asserted that its proposal clearly provides superior value for shareholders, that it is “currently weighing its options,” and that “shareholders will dictate the next steps in this process.”
MCI maintained that its agreement with Verizon — sweetened by Verizon on March 29 — provides certainty on a number of key elements, including a guaranteed minimum of at least $23.50 per MCI share, certainty of closing, realistic synergy projections, strength of capital structure, and the ongoing ability and commitment to sustain network service quality and invest in new capabilities.
This is not a done deal, however, since investors representing more than a quarter of MCI stock have not openly endorsed the merger.
They include MCI’s largest shareholder Carlos Slim, legendary Legg Mason Inc. portfolio manager Bill Miller, as well as hedge fund managers such as Omega Advisors’ Leon Cooperman.
“If the latest Verizon offer is presented to shareholders for approval, we intend to vote against it,” Miller stated in a letter to MCI chairman Nicholas Katzenbach on Tuesday, according to Bloomberg. “We believe the current shareholders of MCI overwhelmingly prefer the Qwest offer.”
Bloomberg also reported that Qwest recently hired the Altman Group, which specializes in building investor support for hostile takeovers. For its part, Verizon recently tapped Innisfree M&A Inc. and Georgeson Shareholder Communications Inc. to support its bid in the event of a proxy contest, the wire service noted.