M&A

Verizon Signals a Higher Offer for MCI

The new figure mentioned in Verizon's registration statement, though much higher than its recently revised offer, is still less than the company ag...
Stephen TaubApril 12, 2005

Verizon Communications Inc. has filed a registration statement with the Securities and Exchange Commission in connection with the company’s proposed merger with MCI Inc. Verizon’s filing states that the maximum it is willing to pay MCI shareholders is $25.13 per share.

The filing also includes a draft proxy statement and prospectus and a proxy card that MCI will send to its stockholders to vote on the merger. MCI’s board has recommended that shareholders approve the deal, according to the Associated Press. In addition, the filing registers the shares of Verizon common stock to be delivered to MCI stockholders at the closing of the transaction.

Verizon, which recently agreed to acquire MCI for $23.10 per share in cash and stock, has been locked in battle with Qwest Communications International Inc., whose offer for MCI is currently valued at $27.50 per share. Last week CFO.com reported that investors representing more than a quarter of MCI stock — including 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 — had not openly endorsed the merger.

On Saturday, Verizon consolidated its position when it agreed to purchase about 43.4 million shares of MCI from eight entities affiliated with Slim for $25.72 per share in cash. In addition, according to The Wall Street Journal, the financier received an effectively free call option on potential appreciation in Verizon shares.

In response to renewed calls from MCI shareholders that the company reconsider Qwest’s higher bid — or at least secure a better offer from Verizon — MCI stated yesterday that the deal between Verizon and Slim was “a private transaction” but added that it “remains committed to obtaining the transaction that is in the best interests of all of its shareholders.” In a number of press reports, that statement was interpreted to suggest that MCI would seek a higher offer from Verizon.

The $25.13 figure mentioned in Verizon’s registration statement, though much higher than its recently revised offer of $23.10, is still 59 cents per share less than the company agreed to pay Slim.

In an interview with the Journal, UCLA law professor Samuel C. Thompson Jr. said that “there’s no case I know of where a board has permitted some shareholders to be paid on the front end a higher cash price and for the other shareholders to be paid less than the cash price on the back end.” Letting the deal stand as is, added Thompson, might leave MCI’s board open to litigation.

MCI’s shares rose 17 cents yesterday, to $26.01, reported The New York Times.